AOL Spinning Out of Time Warner Control
By Associated Press

When AOL flashed $147 billion in stock puffed up by the dot-com boom, Time Warner, one of the world's biggest media companies, fell into its arms in 2001. They swooned over their combination of Internet access and traditional media.

But before long, reality intruded. Among other problems, AOL's dial-up Internet access business was fading, diminishing whatever benefits there might be in having AOL spread Time Warner content online.

Finally, Time Warner filed for the corporate world's version of a divorce Thursday. It said it will spin out AOL as a separate company and get on with its life as a movie, TV and publishing conglomerate.

Now AOL will try to bounce back with the help of its online advertising business, a challenge that falls to former Google Inc. advertising executive Tim Armstrong, 38, who was hired as AOL CEO in March.

Time Warner owns 95 percent of AOL and will buy out Google's 5 percent stake during the third quarter for an undisclosed amount. From there, AOL and its 7,000 employees will be spun off into a separate publicly traded company around the end of the year.

"For AOL, becoming a standalone company will give it more focus and strategic flexibility," Time Warner's chief executive, Jeff Bewkes, said at Time Warner's annual shareholder meeting Thursday in New York.

Meanwhile, Time Warner will focus on movies, cable TV networks such as HBO and CNN, and publishing magazines such as Time, People and Sports Illustrated.

Originally known as America Online, AOL once defined the Web for millions of people. But much of its original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers, back when the company stuffed free trial CDs in magazines and mailboxes. The march of broadband ate away at the business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter.

The decline undercut the premise that the content created by Time Warner's media empire would become even more valuable as AOL plumbed it to expand its Internet audience.

Even after AOL broadened its reach by giving away content and running free, ad-supported sites, that didn't create many new opportunities for Time Warner. Bewkes acknowledged last month that AOL helped promote material such as Warner Bros. movies or TNT television shows, but didn't bring in new revenue for the content. That function can be served just as well by Web portals the company doesn't own, like Yahoo or MSN.

It's no wonder that AOL Time Warner quickly disintegrated into one of the worst combinations in history. In 2002 and 2003, Time Warner absorbed nearly $100 billion in charges to account for the rapidly diminishing value of the combined company. Time Warner even dropped AOL from its corporate name. Today, the combined value of AOL, Time Warner and Time Warner's recently spun off cable business totals around $40 billion.

At AOL in particular, the falloff has been stark. When Google agreed to pay $1 billion for its 5 percent stake in late 2005, the investment pegged AOL's market value at $20 billion. This past January, Google estimated its investment had plunged by more than 70 percent, leaving AOL with a market value of about $5.5 billion.

Today AOL gives away most of its services, like e-mail, to drive traffic to its ad-supported Web sites. But after a few strong quarters, ad growth slowed and then began declining. AOL also has Platform-A, a business that places ads on sites all over the Web, not just ones run by AOL. Yet that reach hasn't mattered enough: Both Yahoo Inc. and Google mine bigger profits from their ad businesses.

Although AOL's operations make money, its operating profit of $150 million in the first quarter marked a 47 percent drop from the same period in 2008.

Meanwhile, AOL's Web sites, which include celebrity gossip site TMZ and tech blog Engadget, averaged 106 million unique U.S. visitors each month during the first quarter, according to comScore Media Metrix - a drop from 110 million visitors in the first three months of 2008. The top three Web companies all posted gains in traffic in that same period: Google, Yahoo and Microsoft Corp.

Time Warner shares rose 55 cents, or 2.4 percent, to close at $23.55 on Thursday.

Frederick Moran, an analyst at The Benchmark Co., said investors and Time Warner shareholders will be pleased by the spinoff news because AOL has acted "almost like an anchor" on Time Warner's stock over the last few years.

Time Warner also recently spun out Time Warner Cable, which provides cable TV and broadband Internet access. Since then, Time Warner Cable's stock has risen 26 percent - but Time Warner shares have been essentially flat.

Ted Leonsis, an executive who retired from AOL in late 2006, said the decision to spin off AOL emphasizes a shift from seeking size and scale - two attributes that were in vogue 10 years ago - to a focus on being nimble and innovative.

"I'm thrilled for the employees and I don't see any other plan, so while it's a great decision it was an inevitable decision," he said.

Former Time Warner CEO Gerald Levin, who was instrumental in AOL's takeover, recently declined to comment about the looming breakup. Levin now works as director of a rehabilitation center in Southern California.

AOL co-founder Steve Case, the other main architect of the 2001 deal and the founder and CEO of investment company Revolution LLC, wrote Thursday on the short-messaging site Twitter that he is glad to see AOL set loose. He said it "has been a long, tortuous journey" and now is "time to open a new chapter."

Carol Bartz: You Can't Make a Baby with 9 Women in 1 month "All Things Digital" Conference

Carol Bartz Talks Shop At The "All Things Digital" Conference

Google wants users to 'Wave'
By Associated Press

SAN FRANCISCO — Google is hatching a new species of e-mail and instant messaging, but the Internet search leader first wants the hybrid service to evolve even more with the help of independent computer programmers.

The free tool, called "Google Wave," runs in a Web browser and combines elements of e-mail, instant messaging, wikis and photo sharing in an effort to make online communication more dynamic. Google hopes Wave simplifies the way people collaborate on projects or exchange opinions about specific topics.

Google offered the first glimpse of its latest offering Thursday during the Mountain View-based company's annual conference for software developers who build programs on top of its services. The rest of the Web-surfing public won't be able to hop on Google Wave until later in the year. (Go to wave.google.com for a preview.)

By the time Wave rolls out for everyone, Google hopes independent programmers will have found new ways to use the service.

Among other things, Google is counting on outsiders to figure out how to weave Wave into the popular Internet communications service Twitter, social networks like Facebook and existing Web-based e-mail services, said Lars Rasmussen, a Google engineering manager.

Rasmussen and his brother, Jens, helped build Google's online mapping service, which sprouted a variety of unforeseen uses after its 2005 debut because of the ingenuity of
external programmers.

Having learned their lesson from the mapping experience, the Rasmussens wanted to give developers ample time to tinker with their newest creation before unleashing it on the rest of the world.

The Rasmussens broke away from Google's mapping service in 2006 to concentrate on building a service that would enable e-mail and instant messaging to embrace the Web's increasingly social nature. They contend e-mail hasn't changed that much since its invention during the 1960s

Yahoo's Bartz Ready For The Good Ship Microsoft To Come In
Story from the Wall Street Journal

Yahoo Inc. Chief Executive Carol Bartz (formerly of Autodesk) said Wednesday she would be open to striking a search deal with Microsoft Corp. if the software giant offered "boatloads of money."

"If there's boatloads of money and the right technology involved, we'd do a deal, sure," Ms. Bartz said at the All Things Digital conference sponsored by The Wall Street Journal. "It's that simple."

Ms. Bartz also said Yahoo was interested in acquiring social-networking and video start-ups, noting that video advertising has grown sharply in recent years. She added Yahoo, which has cut thousands of jobs in the past year, doesn't plan further layoffs.

The future of Yahoo's search business is a key issue for investors. Ms. Bartz and Microsoft CEO Steve Ballmer have talked about forming a partnership on search but the exact nature of any possible deal remains unclear. Mr. Ballmer will speak at the conference on Thursday.
Microsoft was rebuffed when it tried to buy Yahoo last year, but the Redmond, Wash.-based software giant has said it remains open to some sort of deal that could bolster its search capabilities.

Yahoo is the No. 2 U.S. search engine, with 20.4% market share in April, according to market research group comScore. Microsoft continued to lag far behind with about 8% of the market, while rival Google Inc. increased its share by half a percentage point in April to 64.2% of the U.S. market, its highest level ever.

Ms. Bartz faces a number of challenges as she tries to revive Yahoo's struggling advertising business. Google dominates the search market and is more effective at making money from text ads. Yahoo is also struggling with a dramatic slowdown in display advertising spending, a key market to which Yahoo is more heavily exposed than Google or Microsoft.

Web Site Has Read On Digital Books
Story from SiliconValley.com

Scribd is proposing to do for books what iTunes did for music — let readers buy only what they want to read.

Eight years ago, Apple turned the music industry upside-down when it launched iTunes, an online music store that let listeners cherry-pick one or two songs instead of having to buy an entire album. Now Scribd is giving readers the option of buying content, including paying a few dollars for a chapter or two from a travel guide or a how-to book.

That's just one example of the flexibility that digital book purveyors are experimenting with as printed content migrates to the digital format. Another is the pricing model. Paperbacks largely have been priced about $10 to $15, while hardcovers are $25 to $30. With digital books, that price could be any amount. Scribd takes 20 percent of whatever price publishers and authors set for their works; the rest goes to the writer or publisher. Some authors, for example, are releasing their books on Scribd for $2.

One of them is Kemble Scott, a 46-year-old San Francisco writer whose first book, "SoMa," was published as a trade paperback in 2007. For his second book, "The Sower," Scott eschewed print and decided to debut his novel on Scribd as a $2 digital book.

Scott chose the digital route for its immediacy. His thriller includes a number of contemporary references such as swine flu and Susan Boyle, a Scottish singer who rose to media stardom on the wings of YouTube, Twitter and Facebook. "Publishing a book the traditional way can take a year to 18 months from the time you find a publisher to the time it ends up on store shelves," Scott said.

Yahoo's Taskmaster
Carol Bartz is shrewd, strong-minded, blunt, and disciplined. (Don't even think about leaking company information!) But can this no-nonsense tech veteran come up with a plan to save Yahoo? Story from Fortune

Carol Bartz wasn't interested when Yahoo co-founder Jerry Yang first approached her about rescuing the company he'd created at Stanford University 15 years ago. As she drove to his home in Los Altos Hills one day last December, she was prepared to be polite and maybe offer some advice. Bartz, who had retired in 2006 from design-software maker Autodesk, didn't need a new gig, and she certainly wasn't looking to play savior to a company she figured needed a CEO with media-industry chops - not her specialty.

Out of respect for Yang, though, she found herself in his living room, asking him to draw her an organizational chart. "It was like a Catholic school kid diagramming a sentence," she later told business partners. Lines crisscrossed everywhere, with no clear system of accountability. By the time he finished, the hooks were in. "I got it," she told Yang. "What you need is a manager."

That's exactly what Yahoo (YHOO, Fortune 500) got when it hired Bartz, 60, as CEO in January. She is likable yet hard-charging, given to salty language, and always brutally candid. (In March she told a questioner at a Morgan Stanley conference that she uses Google's online maps because they're better than Yahoo's.) Bartz is also a known quantity in Silicon Valley circles: a seasoned executive who understands technology, is skeptical of the kinds of juvenile-sounding job titles that proliferate at Yahoo (Yang remains Chief Yahoo, for example), and thrives under pressure.

Perhaps most important to the Yahoo board, she has shown she can jump-start ailing companies. During her 14-year watch at Autodesk (ADSK), she delivered compounded annual sales growth of 13%, and the stock price climbed more than eightfold.

Bartz's celebrated management skills are going to be put to the test: Once the wunderkind of the web, Yahoo has floundered as the likes of Google, Apple (AAPL, Fortune 500), Facebook, and Twitter have redefined online communication and commerce - and have grabbed much of the buzz along the way. Marketers have stopped pouring money into Yahoo in favor of Google's more pointed, search-driven ad platform as well as a passel of specialty sites such as Glam.com and Break.com. Last year Yahoo's revenue rose an anemic 3% to $7.2 billion; by contrast the company increased annual sales 47% in 2005. Many investors and analysts believe that Yahoo, despite spurning a $45 billion buyout bid from Microsoft (MSFT, Fortune 500) in 2008, ultimately will be acquired or stripped of its most valuable parts.

Bad as things are, though, Yahoo remains one of the most popular online destinations, and users spend more time on Yahoo sites than on any other major web property, including Google (GOOG, Fortune 500). Bartz has the opportunity to harness that popularity to get the business growing again. But first she'll have to come up with a strong vision for Yahoo, a mission that seems at odds with her reputation as a taskmaster and disciplinarian. Is Yahoo a media company, selling advertisers access to its 562 million worldwide unique visitors? Is it a technology conglomerate that builds and delivers applications and services over the web? Or is it perhaps something else altogether?

There's little question that Bartz can make tough, unsentimental choices about which assets and people Yahoo should jettison. (She's already well on her way to fixing that messy org chart and reining in its unstructured culture.) But now she must do something much harder: She needs to figure out and explain what she wants Yahoo to be.

***

None of this would be Bartz's problem if she had simply stayed retired. After stepping down from the Autodesk CEO job in 2006, she busied herself volunteering with charities, vacationing in Hawaii, tending her garden in Atherton, Calif., polishing her golf game, and serving on the boards of Autodesk, Cisco, Intel, and NetApp. (She's since left the Autodesk and Intel boards.) The first year, she told friends, was great. The second, good. By late 2008 - well, the retirement thing was getting old. Bartz missed the thrill, and even the stress, of daily business life.

Though she comes off casual, even folksy, in conversation, she has admitted to associates that she's a bit of a crisis junkie. Bill Coleman, a Silicon Valley executive who worked with Bartz two decades ago, recalls taking a trip to Shanghai in November with Bartz and her husband, Bill Marr. (Bartz and Marr have three children, all adults.) "When my wife asked her how she was doing with the transition, she was like, 'You know, this is much harder than I thought. I like golf - I don't love golf. I like Hawaii - I don't love Hawaii.' You could just tell she was ready for something."

Carol Ann Bartz was born in the summer of 1948 in Winona, Minn., a river town on the Wisconsin border. Bartz's mother died when she was 8, and her father, a mill worker, disciplined his kids with a belt. When she was 12, she and her younger brother moved to Wisconsin to live with their maternal grandmother. In high school Bartz was a drum majorette and a science and math geek, and went on to earn a computer science degree at the University of Wisconsin. She worked her way through college as a cocktail waitress at the Hoffman House supper club, donning a uniform that, she has recalled several times since, included a red miniskirt with black fishnet stockings.

The determination that sprang from those humble beginnings stayed with Bartz as she began her career in the early 1970s, a time when corporate America often treated women with outright hostility. Undeterred, she did programming, sales, and marketing at 3M and Digital Equipment Corp., and eventually moved into upper management at Sun Microsystems, a scrappy young company she joined when it had about 100 employees and $9 million in revenue. Her co-workers quickly recognized her as someone with exacting standards - and a sharp tongue.

Venture capitalist Ray Rothrock recalls being on the receiving end of one such lashing when he was a 28-year-old business development manager at Sun. It was the mid-'80s, long before Silicon Valley's casual culture had solidified, and Rothrock had come to work without a tie. Bartz spotted Rothrock's attire and lit into him. "Ray Rothrock!" she snapped, loud enough for the entire department to hear over their cubicles. "You go home, and you put on your coat and your tie. I don't ever want to see you back here again not prepared to meet any customer who walks in that door." It was embarrassing, and effective - from that day forward, he says, everyone came prepared to do business at a moment's notice.

As CEO of Autodesk, she managed to succeed despite odds that were farcically stacked against her. When she arrived in 1992, sales growth had slowed and profits had fallen. She had to deal with a founder, John Walker, who had a penchant for sniping at the company's management, and with a band of programmers who bristled at her top-down style. As if that weren't enough, on her second day on the job she discovered she had breast cancer. Bartz had a radical mastectomy, made business calls from her hospital bed, and returned to work just four weeks later instead of the recommended six, a decision she has since said other women shouldn't emulate. "I didn't want people saying, 'There - women finally get to be CEOs and look what happens,'" she told the New York Times.

Eventually she silenced any doubters. Bartz transformed Autodesk through a series of smart acquisitions and by encouraging new product development. Autodesk's software and applications became must-have tools for designers and manufacturers alike, thanks to Bartz's insistence that the company methodically roll out new features based on customer feedback. Peers noticed. "Sometimes you get tech industry leaders who are either really great on making money or really great on technology but can't turn it into a great business," says Ann Livermore, a longtime Silicon Valley executive who leads enterprise technology at Hewlett-Packard. "Carol is very balanced between the two."

***

There's plenty for Bartz to tackle at Yahoo, starting with sprawl. David Filo and Jerry Yang's directory of websites weathered the dotcom bust, only to create bigger problems for itself. During a breakneck period of growth between 2003 and 2005, Yahoo expanded into areas such as online dating and job listings, while gobbling up Internet companies, including one called Overture that was the first to figure out a way for advertisers to pay for placement adjacent to online searches. But while Yahoo management was distracted by dealmaking and executive infighting, a crosstown rival, Google, emerged with an entire business essentially built around a technology similar to Overture's.

Google perfected paid search and eventually moved into new areas, such as online applications and maps. Yahoo, meanwhile, lurched from one strategy to the next: Under former CEO Terry Semel, a Hollywood veteran, the company tried to reinvent itself as a digital-media company, complete with original web content and an office in Santa Monica. Semel resigned in June 2007, and Yang stepped in as CEO. His big idea: to seize the lead from Google in search advertising. But Yang's reign, too, had an ignominious end. He was slow to consolidate redundant businesses (two photo sharing properties, multiple social-media sites) and failed to explain the strategy behind his Get Google objective. Sensing chaos at Yahoo, Microsoft CEO Steve Ballmer made the $45 billion bid for his rival, which Yang turned down, much to the dismay of investors. (Yahoo's market cap is about $18 billion today.)

Bartz has brought some much-needed decisiveness and order. She blew up Yang's confusing management structure and tried to impose rules. (She told employees she would "drop-kick to fucking Mars" anyone who disclosed unauthorized company information, a comment that was immediately leaked to the press and blogs.) And she is doing away with "abandoned products floating like debris in space" - Bartz's term of art for ideas that launched in good times, failed to impress, then limped along for years. Properties that fit the description end up on her imaginary Wall of Shame, a list of misfits that a strategy team will save, sell, or scrap. (Online data storage site Yahoo Briefcase and travel tool FareChase, among others, have already landed on the scrapheap.)

She also wants to prevent more space debris from launching in the future. "Yahoo was amateur hour in the past when it comes to product management," she bluntly told business partners last month; groups haphazardly released things without a clear sense of whether customers wanted them. From now on, she has promised, products will arrive on a schedule so that customers can offer feedback, with the best ideas appearing in the next version - a formula that worked well for her at Autodesk.

She's personally soliciting customer comments. Since February, Bartz has been on a listening tour with Yahoo's sales executives, huddling with chief marketing officers, newspaper CEOs, digital ad agency executives - even NBA commissioner David Stern - to find out how Yahoo can get more of their business in a down economy. At a recent series of meetings in New York, she eschewed PowerPoint slides, handed out her business card, took her own notes, and pressed for suggestions on how Yahoo can do better. "When you meet with her, she's very frank. She really doesn't blow smoke," says Nick Beil, CEO of search engine marketing firm Performics, a unit of Publicis Groupe. "I think if she's focused, she can make some pretty big improvements in a short period of time."

One short-term move she likely won't make: selling Yahoo. Bartz has told associates she isn't interested in hawking Yahoo or its search business to Microsoft or anyone else. It isn't that she dreams of overtaking Google, a coup she has privately said is unrealistic. Instead Bartz believes she can use Yahoo's second-place search position to revolutionize online advertising, and in the process restore Yahoo's status as a digital superstar.

If that seems equally unattainable, consider the state of online ads. The rectangular display ads that flash, dance, and wobble everywhere on the web aren't nearly as effective as they should be. The first challenge is targeting. Sites like Yahoo know how to put ads in obvious places - say, a Nissan Altima ad on Yahoo Autos, or an E*Trade ad on Yahoo Finance.

Ideally, though, car shoppers and investors would see those ads everywhere on Yahoo based on who they are, not just what they're doing. If Yahoo could find a way to deliver a luxury car ad to a high-income person in the market for a new vehicle while she's checking her e-mail, formerly low-rent ad space on Yahoo Mail could suddenly become valuable real estate. Similarly, advertisers might be willing to spend more on sites that can deliver a payoff: a store visit, a test drive, or a sale - outcomes that Yahoo today tracks poorly, if at all. Bartz is "going to be pushing her staff to think up ways that can be done," says Rob Norman, CEO of WPP's ad-buying giant, GroupM. "It's a matter of finding the measurable thing against which they can sell."

Not surprisingly, every other Internet site is deploying its best and brightest to come up with better ways to serve Madison Avenue. Facebook, for example, hopes to sell ads that target consumers based on user-generated content. Microsoft is getting set to unveil a new-and-improved search engine. It falls to Bartz to explain to advertisers (and employees and investors) what ultimately will distinguish the company from these competitors and others.

She's fallen short thus far, telling people in meetings that Yahoo is a "starting point on the web" that strives to "deliver 'wow' experiences." The rap sounds quite a bit like the script recited by executives of companies such as AOL (a unit of Fortune's parent, Time Warner), InfoSpace, and other web disappointments. Bartz needs to come up with a compelling plan - and a better way of explaining it - if she doesn't want Yahoo relegated to also-ran status.

Facebook Garners A Big Pile Of Rubles
Story from Business Week

Ending months of fevered speculation over whether it would raise more money, social network Facebook said on May 26 that it will take a $200 million investment from Russia's Digital Sky Technologies.

In return, DST is getting preferred stock worth 1.96% of Facebook, valuing the social network at $10 billion. This is the first time Facebook has raised major equity funding since late 2007, when Microsoft (MSFT) invested $240 million in exchange for a 1.6% stake that valued the site at $15 billion.

In a move that will help Facebook employees unlock some of the value of their shares before the company goes public or is sold, DST will purchase at least $100 million of Facebook common stock from current or former Facebook employees. DST co-founder Yuri Milner tells BusinessWeek that the agreement to buy common stock was not a precondition of the equity investment. "These are two separate transactions," Milner says in an interview. DST and Facebook say they will release details of the plan this summer.
Zuckerberg: No shift in strategy

Facebook considers the investment a "good buffer" and will use it for expansion, rather than to fund existing operations, CEO Mark Zuckerberg says in an interview. "It might come in handy if we want to expand," Zuckerberg says. "We felt the valuation was good. Having additional money will allow us to explore new things, such as building data centers or acquiring companies." Sales are rising, and the company has no concrete plans to spend the cash, he adds. Facebook Chief Operating Officer Sheryl Sandberg said as recently as April that the company did not need additional financing.

Over the past year, while most companies have grown cautious and cut back on expansion, the social networking Web site has pressed ahead with aggressive growth plans. However, Zuckerberg says, the investment does not portend a strategic change. "This doesn't signal any shift in strategy," he says.

Zuckerberg also reiterated that Facebook has no plans to sell shares to the public soon. "For a lot of start-ups, you get the feeling that the IPO is really the end goal," he says. "That's really not the case for us. We view that as one milestone along the way. We don't see it happening in the immediate horizon. It's not something we're rushing toward. We'll do it when it's the right thing for the company."

On a conference call following the announcement, Zuckerberg also reiterated the company's forecast for sales to rise 70% this year. Some analysts remain skeptical that the company can achieve such growth during a recession. For instance, eMarketer speculates that Facebook's main source of revenue—global advertising—will increase 20%, to $300 million, from $250 million. "Where is that [70%] going to come from?" says Debra Aho Williamson, eMarketer senior analyst. "I can't see it coming solely from advertising. Either he has some new revenue stream up his sleeve or he is crazy."

On the call, Zuckerberg said Facebook was drawn by DST's expertise in developing business models that help social networks make money. Based in London and Moscow, DST is a four-year-old investment group. According to its Web site, DST has raised and invested more than $1 billion in over 30 companies, including Russian Web portal Mail.ru, Russian social network Vkontakte.ru, and Forticom Group, which owns and operates other social networks in Russia and Eastern Europe.

While other private investors have offered to buy Facebook shares for valuations in the range of $4 billion to $6 billion, DST co-founder Yuri Milner expressed confidence in the company's ability to make money on its Facebook stake. Although Facebook and other U.S.-based social networks have had a hard time making money from their growing number of users, Milner said the social networks he has invested in are making much more money per user than Facebook is now. Milner said Facebook would be able to generate more money from advertising and forms of e-commerce, such as micropayments for virtual gifts given to a person's friends. "We see monetization patterns that will be very applicable to Facebook going forward," he said. "For us it was almost a no-brainer."

A Soviet at Wharton in 1990

Milner says he does not need to use only traditional metrics, such as price-to-earnings multiples, in valuing his Internet investments. "That's not how we look at it," said Milner. "We see things that others don't see."

Milner, who received part of his education in America, founded DST in 2005 along with fellow Russian businessman Gregory Finger. A 1990 article in the Daily Pennsylvanian, the newspaper of the University of Pennsylvania, said Milner was "the first Soviet citizen ever to study at Wharton," Penn's prestigious business school.

In the story, Milner said his goal was to return with his degree to the Soviet Union to take advantage of the developing free markets and serve as a bridge between his native country and the West. "My idea is to be in the most useful place in the proper time," Milner said.

Almost two decades later, Milner is hoping he has found that place in Facebook.

Why Brick And Mortar Websites Aren't Doing The Job
Story from BizReport

In a recent study from Internet Engine, researchers found that ecommerce-only sites, such as Amazon.com, were out-performing brick-and-mortar store websites by a 3 to 1 margin. The study found that even manufacturers were better utilizing search marketing than retailers. Why? A big part of the problem is the message of brick-and-mortar websites.

According to the most recent internet marketing studies, online shopping hubs appeared in about 30% of keyword search queries.

Selling on the Internet is different than selling in-store," said the owner of Internet Engine. "If you look at the large brick-and-mortar websites, their brand is at the forefront of their online presence. But, they aren't putting the product brands at the forefront."

Brick-Mortar-Stores

To better engage consumers, many consultants suggest putting key product brands at the center of any online campaign. Offering in-store pickup is another way for brick-and-mortar stores to pick up some of the online shopping slack. The best way to garner consumers' attention, though, is through content.

First, the content has to be product centered. Give consumers - and search engines - the information needed to return the right search query results. Second, make the site easy to read for consumers and for search engines and finally, include the right links. Being part of the right online community is a huge step for retailers trying to reach a specific community - online moms, gamers, fishing dads, etc. Branding is important online and offline, but the content has to stand up to the pressure of search engine algorithms.

"We've found that brick-and-mortar stores can do well with paid listings. They know how to advertise or sponsor a keyword, they struggle with SEO copywriting and optimizing content for top organic keyword positions."

Yahoo To Pay $1.8 Million Severance To Departing CFO
Story from Dow Jones News Wires

Yahoo Inc. said Friday that it will pay departing Chief Financial Officer Blake Jorgensen a $1.8 million lump-sum severance payment.

In late February, the company said Mr. Jorgensen would leave the company, (Microsoft has plenty of CFOs) but remain through a transition period.

According to a filing with the Securities and Exchange Commission, his resignation will be effective June 30, or such other date between July 1 Sept. 1 as mutually agreed to by the company and Mr. Jorgensen.

Until the separation date, Mr. Jorgensen will continue to provide services, including transition services to the company. From the separation date forward, Yahoo will continue to pay his medical-coverage for up to 12 months.

Yahoo To Redefine What It Means To Search
Story from Information Week

The company hopes bolstering its semantic search capabilities will help it better compete with Google for ad dollars and happier customers.

At media event in San Francisco on Tuesday, Yahoo Search executives insisted that Internet users don't want to search.

"Nobody really wants to search," declared Prabhakar Raghavan, head of Yahoo Labs and Yahoo Search Strategy. "People want to run their lives."

The stated theme for the press briefing was "The End of the 10 Blue Links," a title that reflects an evolution of Yahoo's search strategy beyond document retrieval. As described by Raghavan, Yahoo is directing its search efforts toward assessing user intent.

When a user types "Star Trek," Raghavan said, he doesn't want 10 million documents, he wants actors and show times.

Yahoo's bid to redefine search as a matter of intent rather than index size can be seen as an admission that it can't match Google's index.

In August 2005, index size mattered to Yahoo. "[O]ur index now provides access to over 20 billion items," Yahoo's Tim Meyer boasted at the time. A month later, Google's Marissa Mayer answered Yahoo's challenge, stating that Google's index was three times larger than anyone else's. And in July 2008, Google said that its index had reached 1 trillion unique URLs.

So it's perhaps understandable why Yahoo might want to reframe the debate. Given its lack of success challenging Google directly -- Google's April search share in the United States reached 64.2%, a 0.5 point gain, while Yahoo's search share fell to 20.4%, a 0.1 point decline, according to ComScore -- Yahoo wants to change the game.

And to some extent, the game has changed. Everyone is focused on mobile applications now. And in mobile search, user intent is easier to determine because location data often provides a clue about what users want. A search for "Star Trek" from a mobile device is more likely to reflect a desire to find a nearby theater and purchase tickets than it would be from a desktop PC, for example. To understand user intent better, Yahoo is developing its semantic search capabilities. Raghavan describes the process as building a Web of objects in the real world and understanding how they relate to each other. In other words, Yahoo is adding structure to its data to make inferences about user intent more accurate and to define relationships between search terms and things in the world.

Rather, its partners are doing that through initiatives like SearchMonkey. SearchMonkey allows developers to share structured data with Yahoo, enabling the display of search results enhanced with related information. Thus, a Yahoo SearchMonkey search result for a restaurant might include not only a link to the restaurant's site, but star ratings, reviews, map links, and related data, all in one search listing.

This is similar to what Google does with its OneBox search results enhancements, but Yahoo is relying on its partners to feed it with structured data.

The gambit appears to be working, too. Since October, the amount of RDFa structured data available through SearchMonkey has increased by 413%. Yahoo reportsthat 70 million SearchMonkey-enhanced search results are viewed by users every day, in 23 markets around the world. And these search results deliver more traffic to site owners, too. Some site owners say they've seen a 15% increase in click-through rates, according to Yahoo.

Yahoo's BOSS (Build your Own Search Service), the company's open search platform, has also been growing. Having recently been upgraded to allow developers to access SearchMonkey structured data, the BOSS API now handles three times as many queries as it did six months ago. With daily query volume in the 30 million to 35 million range, according to Raghavan, BOSS alone is just shy of the estimated 40 million queries handled by Microsoft (NSDQ: MSFT)'s Windows Live Search.

Looking ahead, Yahoo is testing new search enhancements based on its improved ability to understand user intent. One of these, for example, draws on Yahoo's data about locations to suggest related queries. Larry Cornett, VP of consumer products for Yahoo Search, demonstrated how a future search for "Paris" might produce a rich set of pictures and links of other Parisian landmarks like the Musée du Louvre and the Eiffel Tower, data not normally brought up for that keyword.

Yahoo's focus on user intent could lead to happier users, if Yahoo Search can guess user intent accurately. It could also help Yahoo make more money from advertising.

"If we can divine the user's intent, that's obviously of great interest to advertisers," said Raghavan.

Microsoft Maintains Heavy Investment In Online Systems
Story from ZDNet

Microsoft Chief Software Architect Ray Ozzie defended Microsoft’s continued heavy investments in the online-systems arena, claiming the flowing trail of red ink from Microsoft’s Online Systems Business (OSB) doesn’t tell the whole story.

Speaking at the J.P. Morgan Technology, Media and Telecom Conference on May 20, Ozzie touched on his favorite topics — software plus services, Microsoft’s “three screens and a cloud” (mobile devices, PCs and TV) vision; and the need for Microsoft to field consumer services as a way to show off its cloud-computing prowess.

But a question from one audience member on why Microsoft continues to pour so much money into its still-unprofitable online services division got Ozzie to deviate a bit from his script.

(For its FY 2009 Q3, Microsoft’s OSB lost $575 million. Its latest round of layoffs allegedly included some OSB personnel, but relatively few, according to company scuttlebutt.)

The benefit of continued research and investment in Microsoft’s consumer-facing Live services — everything from Windows Live Hotmail, to the soon-to-be-rebranded Live Search — “is bigger than the numbers indicate,” Ozzie said.

Microsoft’s growing family of enterprise-focused services — Exchange Online, SharePoint Online, etc. — have taught the company a lot about cloud requirements. Its investments in consumer services have taught the company important lessons about scale, Ozzie said.

The underlying infrastructure Microsoft has built to deploy and run its consumer services is now being extended to support other services throughout the company, he said. Ozzie pointed to “Cosmos,” the high-scale file system that is part of Microsoft’s Azure cloud platform, as ultimately supporting and aiding every consumer, enterprise and developer property at Microsoft. He noted that the management systems for Microsoft’s current and existing cloud services are all derived from the learnings Microsoft has gleaned from managing its consumer online services.

Ozzie said he believed one of Microsoft’s main advantages vis-a-vis its cloud competitors is “the fact we build both platforms and applications.” (How the world has changed. In the 1990s, Microsoft officials, hoping to head off more antitrust suits, claimed Microsoft maintained a strict wall between its operating systems and applications business.)

The Azure operating system and services platform, which Microsoft is slated to make available in final form this fall, is another place where Microsoft has been sinking substantial funds for the past couple of years.

Ozzie said Microsoft’s focus on building a cloud operating system differentiates it from other cloud vendors. Azure is Microsoft’s “20 or 30 year vision,” he said.

Speaking of Microsoft’s online services, Microsoft is starting to turn up the hype-meter for its new search release, codenamed “Kumo.” At next week’s “All Things D” conference, Microsoft officials are going to show off Kumo to show attendees. But the actual commencement of the rollout isn’t likely to start until early June.

As search expert Danny Sullivan notes, there’s a difference between a demo and an actual debut. And all signs are pointing to Kumo/Bing/or whatever the new release eventually is called, as being made widely available to consumers starting around June 2.

Microsoft Trademarks 'Magic Wand'
Story from ZDNet

While virtually every tech company is concerned with building the better mouse trap, Microsoft is apparently trying to build a better mouse.

Seattle based technology blog TechFlash this week picked up on a newly disclosed patent filing from Microsoft for a motion-sensing "Magic Wand" interface that would allow users to turn on lights, crank up the heat, and possibly even play games with a flick of the wrist.

The wand is technically described as "an architecture that can facilitate rich interaction with and/or management of environmental components included in an environment." It could incorporate a number of handy devices including an accelerometer, a gyroscope, a camera, a laser, a biometric sensor, a transmitter, or a receiver, and would have a handy adviser in text, audio, or video form to assist users in getting their gestures just right.

According to the filing, the advisor could be configurable from appearance to accent, and could be displayed in holographic form. On top of that, the wand could track motion by creating a basic 3D model of its environment, then using a pair of cameras to determine the wand's orientation within that existing model.

Also of note are the Magic Wand's inventors. Among the listed names is J Allard, Microsoft's "chief experience officer" and chief technology officer for the Entertainment and Devices Division. Allard may be best known among gamers for managing the technical development of the original Xbox and serving as the public face of the company's console efforts until shortly after the Xbox 360 launch. Since then, he has remained largely out of sight while working on the Zune multimedia handheld, which Microsoft has promised will eventually support robust gaming functionality.

Rapidly Spreading 'Gumblar' Attack Redirects Users' Web Searches
Malware scripts morph from site to site, and even from page to page, within the same site, ScanSafe researchers say

By Tim Wilson, DarkReading, May 14, 2009

A Web-borne malware attack that redirects users' Internet searches is growing "exponentially," and has already infected more than 2,300 Websites, researchers said today.

Researchers at security company ScanSafe are warning users about an emerging series of Website compromises, collectively dubbed "Gumblar," which are spreading at a rapid rate. In the past week, Gumblar site compromises have grown at a rate of 188 percent, making it one of the fastest-growing infections on the Web, ScanSafe says.

"It should be waning by now, but it isn't," says Mary Landesman, senior security researcher at ScanSafe. "It just keeps spreading."

Gumblar, which has been spotted on popular sites such Tennis.com, Variety.com, and Coldwellbanker.com, is believed to be growing rapidly due to its unique combination of characteristics. The malware resulting from Gumblar forcibly redirects search page results to sites other than those users expect. Many of these pages are imitations of the Websites users actually intended to visit.

"For example, if a user is trying to visit Tennis.com via Google, they may be directed to a fraudulent site designed to look like Tennis.com, where a backdoor Trojan will be immediately downloaded," ScanSafe reports. "The Trojan could then allow cybercriminals control of the victim's computer, leading to a myriad of security issues, including personal data theft and stolen FTP credentials. Once cybercriminals are in possession of a victim's FTP credentials, any sites that victim manages can also be targeted for compromise -- a common malware propagation tactic."

One of Gumblar's exploits is to launch a "man-in-the-browser attack," in which the downloaded malware monitors all traffic to and from the browser, Landesman says. From this position, the malware can selectively swap out links in search results, effectively fooling the user into going to an unintended site.

Landesman speculates that Gumblar might be operating as a "botnet for hire," achieving different ends for different "clients." In many cases, the attack seems to be facilitating click fraud, in which the criminal simply redirects Web traffic to a fraud site in order to collect page views and advertising revenue. In other cases, Gumblar is routing users to malicious sites that might load additional malware onto the user's machine.

"A third potential exploit, which we haven't seen yet, is to redirect users from e-commerce or banking sites for the purpose of fraud, like a traditional phishing attack," Landesman says.

Gumblar is difficult to detect because its scripts vary from site to site, and even from page to page, Landesman says. "The cybercriminals responsible for Gumblar have learned to morph its features quickly," Landesman says. "This, coupled with Gumblar's other dynamic characteristics, is allowing the compromise to disseminate more rapidly than others we've seen."

The rapidly changing nature of the attack also makes it difficult for traditional signature detection or blacklisting tools to block, Landesman says. "If you were an individual user, I'd just tell you to disable JavaScript," she says. "But that's not possible for most businesses to do."

ScanSafe is attacking the problem via Web filtering, essentially preventing the user from going to the Gumblar sites and being infected in the first place, Landesman says. "Prevention is really the only workable defense because once you've been infected and your FTP credentials have been stolen, the criminal can modify passwords and make it difficult for you to get control back," she says.

The Gumblar Website, which dishes out the malware, is going to be difficult to find and bring down, Landesman says. While the site itself has a Chinese registry (Gumblar.cn), its source IP addresses have been traced to Latvia and Russia, and its servers are located in the U.K. "The criminals are doing a really good job of hiding their actual location," she says.

ScanSafe has posted blogs on its Website that describe the malware and its potential effects on enterprises and end users. The company will continue to post updates as the attack spreads, Landesman says.