Filed under: Internet, AOL, web 2.0

This blog’s parent company, AOL is continuing to snatch up smaller companies like there’s no tomorrow just in case there actually is no tomorrow. The latest acquisition is blog search tool Sphere, which we’ve covered several times in the past. While Sphere started out as a blog search engine, the company has since become a tool for bloggers and web publishers who want to show related information from other blogs on their web sites.

Sphere CEO Tony Conrad says the company’s approach will remain “start up style,” even after joining the AOL team, which basically means the management team will remain in place but now Sphere will have access to AOL’s resources and take some marching orders from the top.

As AOL continues to make the transition from an ISP to an internet-based business, the company has been buying up properties like Bebo, Sphere, and a little company called Weblogs Inc. It’s too soon to tell whether the move will be enough to save AOL. But if there’s any truth to the rumors of an AOL/Yahoo! merger, that could do the trick.

[via WebWare]

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New figures released by comScore show that AOL’s Platform A advertising network is the top advertising network in the United States by reach (unique visitors).

According to the figures, Platform A reaches 90.7% of all American internet users, ahead of Yahoo on 85.3% and Google on 80.9%. AOL’s figures include ads served from Advertising.com.

Erick covered rumors of an AOL advertising lead IPO in September 2007 and more recently AOL was said to be in merger talks with Yahoo. Ultimately these figures don’t equate to revenue, but market leader by reach is certainly a strong selling point for AOL in any merger talks or for an IPO.

comScore also released figures for “niche” advertising networks and the Snap Shots Advertising network, launched in November 2007, came out on top. Another notable entry is Widget Bucks, which launched in October 2007.

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A Yahoo board meeting Friday authorized talks with both Microsoft and Time Warner (AOL) next week.

According to a New York Times report quoting sources, Yahoo’s board met to evaluate Microsoft’s takeover bid and other alternatives but did not make a formal decision on which option to pursue.

The fence sitting from Yahoo provides some solace to Microsoft after a week where an AOL-Yahoo deal was said to be close at hand.

The Times also quoted a “person briefed on the discussions” between News Corp and Microsoft for the former to join the bid for Yahoo as describing the discussions as being only “conceptual..suggesting that a joint bid was unlikely.”

(source img credit: RedBrick Blog)

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Google has hired boutique investment bank Qatalyst Group to provide advice on the ongoing battle between Microsoft and Yahoo.

Qatalyst Group is headed by colorful Silicon Valley investment banker Frank Quattrone, who as we noted in March has returned to the Valley after spending years in the wilderness fighting obstruction of justice charges.

Quattrone was head technology banker for Credit Suisse, and Morgan Stanley before that, during the first internet boom and had a hand in practically every major Internet IPO during the 1990s, from Amazon to Netscape. Notably Quattrone was one of the first investment bankers to show an interest in Google.

Amid daily reports of Microsoft’s attempted takeover of Yahoo, it comes as little surprise that Google has turned to an outside advisor for guidance. That it is Quattrone’s Qatalyst Group shows that Quattrone may climb back to his prime spot in Silicon Valley faster than his detractors would have expected..

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Earlier today, venture capitalist Fred Wilson of Union Square Ventures wrote a post expressing concern that Web startups tend to languish after they are bought by big companies. To help make his point, Wilson reproduced the comScore chart above, which suggests that the number of people visiting the bookmarking service del.icio.us, which is owned by Yahoo, has dropped off considerably over the past nine months. Wilson was an investor in del.icio.us and profited from its sale to Yahoo in December, 2005. Yet he still laments its apparent struggles under Yahoo’s ownership.

But how bad is del.icio.us struggling really? Yahoo execs always point to it as an internal success story. We asked founder Joshua Schachter, who still runs the service as a Yahoo employee. Despite the stats bandied about by his former investor, Schachter responded by e-mail:

We continue to grow normally.

Unique users is not a good measure of our growth, though.

Much of our traffic is through the Firefox and other browser extensions, which is not measured by these systems.

Additionally, we cut off search indexing several months ago, which also hurts the UU [unique user] numbers.

Since our goal here is not to grow traffic but instead provide a way for people to save things, it’s not something I am really worried about.

That certainly is plausible. Whenever I use del.icio.us I simply save Web pages from the plug-in on my browser, and rarely actually go to the site. I’d estimate that my ratio of saving things to going to the site is 10 to 1, maybe even 20 to 1. As long as people keep saving things to del.icio.us it could prove to be a boon to Yahoo in better search results alone—no matter what the traffic situation is.

But del.icio.us has bigger problems. It has not changed much in years and cannot seem to get its 2.0 version out the door. This despite the fact that Schachter’s team of engineers has been working diligently on improvements since last September. The new version looked like it was ready to go in January, but then the launch was mysteriously pulled. There are rumors that scalability issues were plaguing the project. Hell, it’s been so long that Delicious 2.0 is news again (and, oh yeah, the periods are going away).

While I still do find del.icio.us a useful service, I don’t use it as much as I once did. The Web has evolved and del.cio.us, for whatever reason, has been held back. Here’s to hoping it can push out Delicious 2.0 before Yahoo gets acquired. Because, although Wilson probably won’t be shedding a tear for Yahoo, it is not only small companies that get stifled in acquisitions.

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Interesting news coming out of Washington D.C. today around the addition of Google advertisements on Yahoo search result pages. House Judiciary Committee Chairman John Conyers, Jr. (D-MI) (pictured) and Judiciary Ranking Member Lamar Smith (R-TX) made a joint statement saying that the deal “further underscore[s] the need for a hearing on the state of competition on the Internet and online advertising.”

In February, the House Judiciary Committee announced plans to hold a hearing on the State of Competition on the Internet. Yesterday’s announcement of a two-week trial venture between Yahoo! and Google, as well as reports of a possible Yahoo!/AOL merger, further underscore the need for a hearing on the state of competition on the Internet and online advertising. The Judiciary Committee’s Task Force on Competition Policy and Antitrust Laws will continue to explore these issues.

Microsoft must be happy to see this, which underscores the fact that the government won’t sit on the sidelines as the Internet giants sort out who gets Yahoo’s search assets. It’s time for everyone to open their checkbooks and call their lobbyists. Congress wants a piece of Yahoo, too.

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What a day. I can’t say neither side is throwing punches any longer in the epic fight over what’s left of Yahoo. Microsoft and Yahoo are done, for the most part, with sternly worded letters.

Yesterday Yahoo made two announcements/leaks. First, that they were very close to agreeing to terms that would combine Yahoo and AOL as an alternative to the Microsoft deal. And second, that they will run, ahem, a two week test of Google Adsense on 3% of their Yahoo search results page, instead of their own ads.

Microsoft responded that the Google deal is a precursor to handing over de facto monopoly power of the search advertising space. And they threw their own curve ball as well: News Corp. has switched teams and is now in Microsoft’s camp.

The formal entry of AOL into the discussions suggests Time Warner wants to offload the asset soon. If a Microsoft/Yahoo deal goes through, the only realistic suitor for AOL is Google, and that gives them little negotiating leverage.

The News Corp news is more interesting. In a move reminiscent of the Italians switching sides in World War II, they’ve abandoned their Yahoo soul mate for a more compliant Microsoft. They put in a bid for Yahoo in February (more), which was reportedly countered just a couple of weeks ago. My guess is the counter offer wasn’t very interesting, so they switched sides. You gotta love News Corp., they’re always there for you when they need you.

But by far the most interesting news is the Yahoo/Google alliance. Industry insiders still question whether regulators would allow the deal, but Yahoo’s been whispering around Silicon Valley that a business partnership with Google, as opposed to a merger, would stand a much higher likelihood of getting approved.

What Is Yahoo’s Strategy - Scorched Earth, Or Knife To The Nose?

Yahoo has put costly severance plans in place to both retain employees and make themselves a less attractive acquisition candidate. But top talent has left anyway, and just about everyone at Yahoo seems to be looking for a job (even execs I’ve spoken with). Meanwhile, the Google deal shows they would rather give up the search marketing game, their biggest asset, than become part of Microsoft.

Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.

I can’t decide if nose knifing or scorched earth is the best way of describing what they’re doing, but I have to ask: If Yahoo “wins” this epic battle with Microsoft, will there be anything left at the end to celebrate over?

It’s time to end this thing before Yahoo ends itself. I don’t care if they throw AOL, MySpace, and half the rest of the Internet into the deal along with Yahoo. But the health of the Internet demands a counter balance to Google. Yahoo-Microsoft, given the current state of things, is the only reasonable outcome.

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Things are moving fast in the Yahoo-Microsoft drama. All the different forces are aligning for an endgame. The latest twist: The WSJ is reporting that Yahoo is close to signing a deal to combine with AOL.

This at the same time that Yahoo is doing a limited test to place Google ads in its search results. Meanwhile, News Corp, which Yahoo once hoped would be its white knight, is said to be turning on Yahoo and talking to Microsoft about joining its bid. Obviously a lot of balls are up in the air right now, and anything is possible.

Here is how the AOL-Yahoo combination is shaping up, according to the WSJ:

Under the terms being discussed, Time Warner would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, the people said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion. As part of the deal, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share

Tellingly, that $10 billion valuation is half of what AOL’s business was pegged at when Google invested $1 billion for its 5 percent stake in AOL a little over two years ago. (But that does not include the dial-up business). What we are witnessing is all sorts of contortions on both sides to make the numbers work. We’ve believed all along that Time Warner will put an offer on the table, but it will be difficult to make it pencil out, especially if an AOL-Yahoo combo is up against a three-way Microsoft-MySpace-Yahoo deal.

Each of these potential deals would create integration nightmares, but a three-way tie between Microsoft, MySpace, and Yahoo would create an entity with so much traffic and advertising inventory that it might not matter. The chances of such a complicated deal going through, though, are small. The most likely outcome is still Microsoft buying Yahoo, and this is all just fodder for the negotiations.

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News Corp is said to be in talks with Microsoft about joining its bid for Yahoo, according to sources quoted by the New York Times.

News Corp entering the mix may allow Microsoft to raise its bid, putting even more pressure on Yahoo to accept it. It would also remove News Corp as a possible alternate bidder for Yahoo.

A combined Microsoft/ News Corp/ Yahoo would marry Fox Interactive Media and most notably MySpace with Yahoo’s web properties and Microsoft Live and MSN services, creating an even bigger challenger to Google.

According to the Times, the talks between Microsoft and News Corporation are at a sensitive stage, with their source stating that “there’s a long way to go before anything is definite.”

The news comes after another colorful day in the Microsoft/ Yahoo standoff with Yahoo announcing a trial of Google ads against its search results, and Microsoft responding by saying that any Yahoo/ Google tie-up lessened competition.

Update: The WSJ is reporting that Yahoo is close to signing a deal to combine with AOL.

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Microsoft has responded to news earlier today that Yahoo was testing Google Adsense ads on their search results.

From Brad Smith, Microsoft’s General Counsel:

“Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google’s hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.”

The 90% market share in the first line is where the deal may well come unstuck (presuming its expanded). Will Government regulators sit back and allow Google to take a 90% market share through a deal with Yahoo?

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