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Content Tagged with Microsoft + Web2.0

Microsoft Ads: First Phase To “Engage Consumers, Spark Conversation”

So the tech and geek crowd is a little underwhelmed by the new $300 million Microsoft advertising campaign featuring Jerry Seinfeld that kicked off tonight. It’s mostly content free, with just one mention of Microsoft near the end. It’s a far cry from the brilliant Microsoft v. mac ads that Apple has run over the years.

So what’s the deal? In an email we’ve obtained from Microsoft SVP Bill Veghte to all employees, he talks about the goals of the campaign. The overall goal is to inspire consumers and “tell the story of how Windows enables a billion people around the globe to do more with their lives today.” This first phase, he says, “is designed to engage consumers and spark a new conversation about Windows – a conversation that will evolve as the campaign progresses, but will always be marked by humor and humanity.”

The ads are just an icebreaker, he ads, to reintroduce Microsoft to consumers. Later this month they’ll do a deeper dive, which I assume means talking about features.

One thing’s for sure - the ads have sparked conversation. Full text of email is below:


From: Bill Veghte
Sent: Thursday, September 04, 2008 5:37 PM
To: Microsoft - All Employees (QBDG)
Subject: Telling the story of Windows

Since it first launched nearly 25 years ago, Windows has been one of the most successful products in the history of the high tech industry. As we set our sights on the next 25 years, it is essential that we deliver incredible offerings on a great platform. We must also tell the story of how Windows enables a billion people around the globe to do more with their lives today. We must inspire consumers with the promise of what Windows uniquely makes possible across the PC, phone and web.

Telling our story means making significant investments to improve the way consumers experience Windows. To that end, we are focused on making improvements at practically every consumer touch point, from the moment they hear about the Windows brand in our advertising to how they learn more about Windows products online; from how they view Windows and try it at retail to how they use the entire range of Windows offerings – Windows Vista, Windows Mobile and Windows Live – across their whole life.

Today, we are kicking off a highly visible advertising campaign. The first phase of this campaign is designed to engage consumers and spark a new conversation about Windows – a conversation that will evolve as the campaign progresses, but will always be marked by humor and humanity. The first in this series of television ads airs initially in the U.S., and it aims to re-ignite consumer excitement about the broader value of Windows. The first television spot aired on NBC during the opening game of the NFL season and will be seen throughout the evening on various primetime programs. Worldwide, you can view this first TV spot at http://msw.

This first set of ads features Bill Gates and comedian Jerry Seinfeld. Think of these ads as an icebreaker to reintroduce Microsoft to viewers in a consumer context. Later this month, as the campaign moves into its next phase, we’ll go much deeper in telling the Windows story and celebrating what it can do for consumers at work, at play and on-the-go. At that time, I’ll be back to share more information about our plans to further strengthen the bond between consumers and Windows – one of the most amazing products, businesses and brands of all time, and, with the right tenacity, passion and agility from all of us, a story that has many great chapters to come.

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Microsoft’s Answer To Google Docs Hits 1 Million Users

Microsoft has announced that its Office Live Workspace Beta has reached its one millionth user. The service, which serves as both an extension to Office and a direct competitor to Google Docs and startups like Zoho, was announced last winter and opened in public beta last March.

When we originally covered Live Workspace, we criticized its underwhelming web-based text editor. Rather than focusing its efforts on improving webtop document editing, which is offered by rival Google Docs, Microsoft is trying to bolster its Office desktop suite with Live Workspace. Users are encouraged to edit their documents through the nearly-ubiquitous Office products like Word, with Live Workspace syncing changes to an online archive and other contributors.

The site does offer an online editor, but Microsoft doesn’t go out of its way to point it out - during the intial announcement it wasn’t clear that one existed at all. The strategy makes sense for Microsoft: with an overwhelming monopoly on desktop publishing software and almost no presence with web-based collaborative solutions, it would rather present this as an bonus feature for Office rather than a direct competitor to Google Docs - the longer people think they need desktop software to edit their documents, the better.

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It Looks Like Yahoo Dislikes Internet Explorer Too

Yahoo Page

Even though the drama surrounding Microsoft’s Yahoo acquisition has subsided, it looks like there’s still some bad blood.

A tipster yesterday sent us a screen shot of Yahoo’s front page running on Internet Explorer with a Firefox recommendation sitting atop the page. “Yahoo recommends upgrading to the NEW safer, faster Firefox 3,” the ad says.

Yahoo still offers its version of Internet Explorer on its Downloads page, but if it isn’t safe or fast when compared to Firefox 3, why is the link still active?

Maybe it’s just some sour grapes.

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Meet Chrome, Google’s Windows Killer

Make no mistake. The cute comic book and the touchy-feely talk about user experience is little more than a coat of paint on top of a monumental hatred of Microsoft.

Chrome, the Webkit-based Google browser that launches tomorrow at Google.com/chrome, will give them a real foothold on the desktop and way more control over how web applications perform. While it seems that Chrome is aimed at IE and Firefox, the target is really Windows.

They’ve built their own Javascript engine despite the fact that Webkit already has one. This should make Ajax applications like Gmail and Google Docs absolutely roar. When combined with Gears, which allows for offline access (see what MySpace did with Gears to understand how powerful it is), Chrome is nothing less than a full on desktop operating system that will compete head on with Windows.

Expect to see millions of web devices, even desktop web devices, in the coming years that completely strip out the Windows layer and use the browser as the only operating system the user needs. That was going to happen anyway, but Chrome + Gears just made the decision a whole lot easier for hardware manufacturers to make.

Microsoft, meanwhile, is stuck with a bloated closed source browser that they don’t even tether to their search engine for fear of more antitrust woes. Google can push their search engine and other web services all day long on Chrome, with no government interference. So not only will Chrome drive lots of incremental revenue to Google, it also paves the way for a Microsoft-free computing experience.

I love Chrome already and I haven’t even tried it yet (nor will I be using it much soon, since it will only work on Windows for now). But Google’s days of unchecked growth may soon come to an end. They are quickly becoming the new Microsoft.

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First Modular Multi-Touch LCD Screen Takes Aim At Microsoft

MultiTouch Logo

MultiTouch, a company specializing in, you guessed it, multi-touch technology, today launched the world’s first modular multi-touch LCD screen, which will allow owners to create screen tables and walls to their desired size.

Dubbed the MultiTouch Cell, each LCD screen unit is available in both 32- and 46-inch sizes and offers Full HD capability. The Cells can be positioned in portrait or landscape modes and can be turned into huge multi-touch screens or a multi-touch coffee table for those who don’t need something so grandiose.

The MultiTouch Cell is the company’s response to Microsoft’s Touchwall, which we wrote about earlier this year. Touchwall uses three infrared lasers that scan a surface, and a camera, which feeds information back to Microsoft’s Plex software after something breaks through the laser line. In contrast, the MultiTouch Cell uses an LCD display and according to the company, bests current projector-based systems by improving durability — MultiTouch claims users will get 50,000 hours of use compared to 3,000 hours for projector-based offerings — as well as improved image resolution, contrast, and color quality.

MultiTouch Two Cells

Depending on their needs, MultiTouch customers can buy dozens of LCD modules and arrange them in any way they wish without worrying about connectivity. Each LCD module features HDMI, FireWire, and USB ports and can be connected to a Mac, Linux or Windows computer, meaning each screen in the setup can display one large image or something different.

Although MultiTouch uses LCDs instead of projector technology, owners won’t save any money buying a MultiTouch system. The company’s 46-inch offering costs almost $16,000 with a fully-configured Linux PC to run the software, while a 46-inch display without the PC will cost about $14,700 per unit. 32-inch displays with Full HD capability cost about $8,300 with the Linux PC and almost $7,200 without it.

Ever since Microsoft announced its Surface computer, which currently retails for about $10,000 and can be found in some AT&T stores, more companies have jumped on the multi-touch bandwagon. But so far, development costs are extremely high and companies haven’t been able to bring prices down to an affordable level for consumers. For its part, Microsoft claims the Surface will be available to consumers in 2011, but I wouldn’t hold my breath.

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Microsoft’s Live Search Cashback Scheme Fails To Move The Market Share Needle

When it comes to search, Microsoft is trying everything it can to become a serious player. It tried to acquire Yahoo, its latest version of Internet Explorer attempts to steer Web surfers away from Google, and then there is straight-out payola to search advertisers. I am talking, of course, of Microsoft’s Live Search Cashback promotion, which lets advertisers offer rebates to consumers who make a purchase after doing a Microsoft search.

After Live Cashback launched in May, Microsoft saw an initial one-month boost in its share of the U.S. search market (from 8.5 percent in May to 9.2 percent in June). But in July, its share slipped again down to 8.9 percent, according to comScore. Although we only have two months of full data (June and July) since launch to evaluate, it doesn’t look like Cashback is having any effect.

While two months worth of data is far from conclusive, it does suggest that in search you can’t buy market share. You have to earn it.

During the same period, this is what happened to Google’s and Yahoo’s U.S. search market share:

U.S. Search Market Share
———-May, 2008——June, 2008—–July, 2008
Google——-61.8%———61.5%———-61.9%
Yahoo——-20.6%———-20.9%———-20.5%

Click on the table below for a market share figures for all the major search engines going back to July, 2007

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Microsoft Turns Super Awesome TouchWall Into Super Snoozy PowerPoint Plugin

Remember TouchWall, the experimental Microsoft touch interface operating system we wrote about in May (here’s me playing with it)?

We’ve been trying to get Microsoft to send us a copy of the operating system so that we could build a touch interface computer the size of a wall, but they have yet to agree. Today they say the technology is still years off in terms of development. But the overall idea has inspired a new product which is being released today by Microsoft Office Labs - pptPlex.

Despite the horrible product name, some people will find this very useful. it turns PowerPoint into a more dynamic presentation tool that breaks away from the slide mentality to allow the presenter to zoom in and out of areas. No more worrying about whether or not a bit of text will be large enough to read when projected on a wall. You can simply zoom in on it.

A video overview is below:

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Apple Considers Streaming Media from iTunes to iPhone

AppleInsider has posted details about a patent recently filed by Apple that describes technology for playing iTunes content from a desktop computer remotely on an iPhone or iPod touch.

The new software would load only meta data about songs, videos, and other media onto a handheld device. It would then allow users to stream this media from their desktop computers on demand and even let them organize their iTunes libraries remotely (by adding, deleting, and moving files around). The main benefits come from saving space on your handheld device, where disk storage is scarce, as well as saving the time it takes to synchronize.

There’s been no official word from Apple on when or whether it plans to release this technology (it files patents all the time that go nowhere). But such a development could be seen as one step towards a streaming music service like Rhapsody or Napster, which have operated in stark contrast to Apple’s download model. However, the patent does not suggest that Apple plans to stream data from its own servers - just consumers’ own desktop computers, where they keep the music they have downloaded.

Apple could also be understood to be taking on at least one facet of Microsoft Mesh, which promises to make consumers’ personal files available to them on whichever device they use. Of course, MobileMe already goes to show that Apple has data synchronization on its mind - but perhaps there’s a broader trend here as well.

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Time Warner Ready To Unload AOL In Pieces. But At What Price?

Time Warner is moving forward with its plans to sell off AOL in pieces, and is finally ready to formally separate the AOL portal and advertising business from its legacy dial-up access business. But how much can it hope to get for these parts? When Google invested $1 billion in AOL a few years ago for a 5 percent stake, that valued AOL at $20 billion (which some people thought was an inflated figure even back then). Today, even after breaking it up, Time Warner will be lucky to get more than $7 billion for the whole lot.

Although it wants $10 billion for just the advertising and content business, there are only two serious potential buyers: Yahoo and Microsoft. And Time Warner is not making any friends at Yahoo by interfering with the selection of one of its new board members. If Microsoft turns out to be the only bidder, it would have no reason to offer much more than the $4 billion that the market is valuing the business at today. And, of course, all bets are off if Microsoft ends up buying Yahoo instead. (The dial-up business also only has one serious buyer: Earthlink).

According the WSJ (subscription required):

The Yahoo discussions have valued AOL at around $10 billion, excluding the dial-up business. In contrast, Time Warner’s current stock price — around $14 — suggests a value of no more than $3 billion to $4 billion for the ad-sales and content businesses, some analysts say.

Analysts value the [dial-up] business at only $2 billion to $3 billion, but Time Warner is expected to seek more than that in any sale discussion, according to people familiar with the situation. Despite having been in decline for several years, the business is still profitable and generates a predictable stream of cash. It serves 8.7 million subscribers, while EarthLink, the second-biggest dial-up service, serves 3.3 million, including broadband and Web-hosting subscribers

If Time Warner can convince Yahoo it still needs AOL, it might get closer to that $10 billion valuation for the online ad and content business. (Except that transaction would likely be structured so that Time Warner gives Yahoo cash in return for a large minority stake in the new combined AOL-Yahoo). According to comScore, AOL’s Platform-A is the largest online advertising network in the U.S. in terms of its reach, with 170 million individuals seeing its ads in June. Although Yahoo is probably bigger if you add together the reach of its advertising network with that of its own sites, depending on how much overlap there is. And many of those Platform-A ads, especially those from Advertising.com, are remnant ads sold at less than $1 CPMs (so volume is key).

(Disclosure: I own Time Warner shares).

How Much Is All Of AOL Worth?
( polls)

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Microsoft Scores Facebook Search Deal And May Get A Little Live.com Branding To Boot

Microsoft SVP Satya Nadella has announced that the company has expanded its deal with Facebook to integrate Microsoft’s Live Search into the social network. There are few details at this point, but Microsoft will be serving up advertising (both traditional and sponsored search results) through Facebook by the end of the year. Microsoft previously bought a $240 million stake in Facebook at a massive $15 billion valuation, in exchange for global advertising rights.

The news parallels the search deal that Google signed with MySpace in 2006, when it won the rights to provide search and advertising to the News Corp-owned social network, with a minimum rev share agreement of $900 million. Microsoft was also clamoring for search rights on MySpace at the time, but Google managed to beat it out by forging a hasty deal.

Google has had a hard time monetizing the search deal with MySpace, but it blames the under performance on the difficulty with monetizing social networks in general. It’s probable that Microsoft will run into similar issues on Facebook, but it may be just as concerned with exposing users to Live search as it is with generating revenue, at least in the short term. Back in 2006 Michael speculated that Microsoft may have been taking a loss on its initial advertising deal with Facebook, simply to beat out Google and get some traction in the advertising space. It may be taking a similar approach here.

Microsoft is eager to expand its Live search, which has languished far behind Google and Yahoo for years. In May the company launched an apparently desperate move to actually pay users for using the site through its Live Search Cashback program. That initiative has proven to be a success, increasing search usage by 15%. But Live search still trails Google and Yahoo by huge margins, accounting for only 9% of all search queries (Yahoo and Google account for 21% and 62% respectively).

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Microsoft Rumbles, Rearms For Online War It Can’t Win Without Yahoo

Microsoft CEO Steve Ballmer dropped the ax today, and it landed on Kevin Johnson’s neck.

Johnson, Microsoft’s soon-to-be ex-President of Platforms & Services, has been with Microsoft since 1992. He was in the unfortunate position of leading the recent Vista effort through its very troubled launch, and running Microsoft’s online efforts while watching their lunch be eaten by Google. He takes a consolation prize: He will become the CEO of Juniper Networks, a $12 billion network hardware manufacturer.

So what’s next for Microsoft? The Windows and Windows Live products now report directly to Ballmer. All the online stuff, including search, advertising and most MSN/Live.com services will be headed by a new executive. Ballmer says they’ll look for the person to lead their Google-killing efforts both internally and externally.

Putting Johnson aside for a moment, It’s damn well time Microsoft put someone in charge of its online efforts. Johnson had to split his time with the Windows cash machine and the results have been somewhat predictable. A half time executive running a product that doesn’t even have a brand (Live? MSN? Microsoft?) can’t win against Google.

The truth is that the next guy (or gal) isn’t going to make any fast gains on Google, either, no matter how awesome Mesh and Silverlight are. Ballmer seems willing to spend as long as it takes, though, noting that the war with Google is over the long term, not the short: “In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas…”

That sounds like Microsoft will channel yet more Windows and Office profits into their Internet startup. There’s no question that they intend to compete in search and advertising any more. The only question is whether they have any chance of winning.

Even if Microsoft concedes that they have a years (decades?) long war on their hands, they have to face the fact that Google’s commanding lead in search, and the network-effect driven advertising wealth that comes with it, will be hard to beat. And all those client software profits won’t last forever, particularly since Google is eating away at that via their suite of free Office products.

The first thing Microsoft needs to do is buy Yahoo - all of it. That brings them to half of Google’s market share in search, and at least they’re in the game.

Another thing Microsoft needs to do is simply pick a brand name for the Internet side of things, and stick with it. Microsoft. MSN. Live. Whatever, just name it something a little catchier than “Online Services.”

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Mass Reorg at Microsoft Platforms & Services Division

Microsoft has just announced a major reorganization of its Platforms & Services Division. It will now be split into two groups (Windows/Windows Live and Online Services) which will both report to Steve Ballmer. That’s right. Steve Ballmer will now personally be running Windows.

Kevin Johnson, who used to head the Platforms & Services Division, will soon be leaving the company to become the CEO of Juniper Networks. Steven Sinofsky, Jon DeVaan and Bill Veghte will be in charge of the newly created Windows/Windows Live group. Microsoft has not yet chosen a leader for the Online Services group.

The full press release is below.


Microsoft Announces Reorganization of Windows and Online Services Business

Platforms & Services Division to Split Into Two Groups and Report to CEO Steve Ballmer.

REDMOND, Wash. — July 23, 2008 — Microsoft Corp. today announced that the Platforms & Services Division (PSD) will be split into two groups: Windows/Windows Live and Online Services, with both groups reporting directly to CEO Steve Ballmer. Microsoft also announced that PSD President Kevin Johnson will be leaving the company. Johnson will work to ensure a smooth transition.

“Kevin has built a supremely talented organization and laid the foundation for the future success of Windows and our Online Services Business. This new structure will give us more agility and focus in two very competitive arenas,” Ballmer said. “It has been a pleasure to work with Kevin, and we wish him well in the future.”

Effective immediately, senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte will report directly to Ballmer to lead Windows/Windows Live. The Windows organization recently announced strong annual sales, with more than 180 million copies of Windows Vista sold globally, and it has driven more than 100 million installs of its Windows Live suite. The organization’s innovation pipeline includes a new version of Windows Internet Explorer, the next version of Windows and the next generation of the Windows Live product suite.

In the Online Services Business, Microsoft will create a new senior lead position and will conduct a search that will span internal and external candidates. In the meantime, Senior Vice President Satya Nadella will continue to lead Microsoft’s search, MSN and ad platform engineering efforts. Microsoft recently announced a strategy to redefine search through innovations in the user experience and business models. As an example, the company’s cashback search program, announced in May, is already generating strong momentum among online shoppers and advertisers.

In addition, Senior Vice President Brian McAndrews will continue to lead the Advertiser & Publisher Solutions Group (APS). APS has great momentum, having signed more than 100 new publisher deals in the past year. McAndrews will continue to focus on the display advertising opportunity for Microsoft, driving execution and integration of advertising assets, including recent acquisitions such as Massive Inc., Navic Networks, ScreenTonic SA and YaData Ltd.

“Our Windows business is firing on all cylinders,” Ballmer said. “We see tremendous opportunity in search and advertising, and we have a clear strategy for investing in success today and growth in the future.”

“Microsoft is a special place and presents opportunity to so many,” Johnson said. “I have been so fortunate to have experienced 16 amazing years of building Microsoft’s business, learning from great leaders in the company and working with phenomenally talented people.”

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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Microsoft Searches Jump 15% After Live Cashback Launch

This isn’t enough data to declare Microsoft’s much derided Live Cashback search product a winner, but the first full month after it launched (June) shows a 15% gain in search volume v. the previous month, according to Comscore. This erases the previous month’s losses, bringing Microsoft up to 9.2% overall search share.

Live Search CashBack gives advertisers the option of offering users a direct rebate for purchases made after searching on Microsoft. The product shifts search advertising from cost-per-click (CPC) to cost-per-action (CPA) and give a lot of the revenue back to users.

Live Search Cashback isn’t designed to grab a ton of market share away from Google and Yahoo, but Microsoft is hopeful that more users will come to them when doing searches around buying goods online. And those queries tend to bring in the lion’s share of advertising dollars. This won’t affect Microsoft’s bottom line much, of course, since they are passing most of the money from purchases right back to consumers.

This is far from a definitive statement of Live Search Cashback’s success as an ongoing product, but the jump is an early sign that consumers may be intrigued. Let the debates continue.

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Microsoft Testing Self Serve Publisher Advertising Product For The First Time

Microsoft is testing a new pilot program that will let third party publishers add Microsoft’s contextual ads next to their content in a self-serve format. From what we can tell from the email below, it will be very similar to Google’ Adsense and Yahoo’s Publisher Network.

Google dominates this space (and all other contextual advertising) because it offers publishers far higher fees for ads. Yahoo and Microsoft have made up for that shortfall by offering guarantees in the past. Or in the case of Yahoo, by offering more flexible products like allowing their ads to be shown next to third party search results.

The new program will begin on July 21. No word on how Microsoft will get more money to these sites than what is offered by Google today but they are not requiring exclusivity: “You may also use Microsoft ads on the same sites and pages as Google ads as long as you do not have a specific exclusivity agreement with them.”

Putting ads on third parties is a controversial product, since advertisers expect the kinds of click throughs and conversions that they get from search. Earlier this week Google was sued for fraud because ads placed on parked pages weren’t producing results.

Still, if Microsoft is willing to take a bath and pay publishers more than Google does, they can get a lot of page views quickly and build up inventory.

Full email is below. I’ve contacted Microsoft for a comment. From what we can determine this is the first time Microsoft has experimented with a self-serve product. Until now, you had to enter into a partnership agreement with them and they only targeted very high traffic sites.

Update: A Microsoft spokesperson says this trial has actually been underway since earlier this year with a small group of publishers, but won’t say when or if this will officially roll out publicly.

Update 2: Microsoft has sent us the following statement:

Microsoft’s self-serve advertising offering for publishers is still under development and is currently in a private pilot phase, being tested by select publishers who met the participation requirements. The private pilot phase began earlier this year. A private, phased approach allows us to learn more about customer interest in content advertising and provide guidance as to how we can improve the product and deliver the right features required to meet publisher and advertiser needs. It’s our intention to continue to expand our high quality network and relevant audience gradually and intelligently over time for our advertisers. We will evaluate customer interest and product performance as we move through the private pilot, but we have no specific launch plans to announce at this time.

We encourage publishers who are interested in joining the pilot to fill out an interest form here: http://advertising.microsoft.com/publisher


Dear xxxxxx:

Thank you for your recent completion of the self-submission form on the Microsoft adCenter site for this program. Below is more information for you about the pilot. I can answer general questions you may have about participation. Please let me know if you would like to proceed and I can invite you formally on Monday July 21st to begin.

The pilot is small and not public, and participants will be asked to agree to a Confidentiality Statement before taking part – this means that you will not be able to blog about the program or discuss it outside of your company.. We would be seeking feedback and suggestions from you about the service, its interface, and its effectiveness in generating revenue for your site. There is no exclusivity requirement and no minimum requirement for the number of ad units you may implement. You may use other contextual ads on the same pages as Microsoft ads during the pilot or implement only on the most relevant pages on your site.

You may also use Microsoft ads on the same sites and pages as Google ads as long as you do not have a specific exclusivity agreement with them.

“Competitive Ads and Services: In order to prevent user confusion, we do not permit Google ads or search boxes to be published on websites that also contain other ads or services formatted to use the same layout and colors as the Google ads or search boxes on that site. Although you may sell ads directly on your site, it is your responsibility to ensure these ads cannot be confused with Google ads.”

In addition, please take note of the following:

•We would request that you agree to take part in the pilot for at least two months or two full payment cycles.

•Only publishers who are U.S. based may take part; completing a W9 form is necessary to receive payment.

•Click rates will be closely monitored during the pilot and publishers whose click rates give cause for concern or are anomalous will be removed from the program and will not be paid for clicks on their ads.

•Microsoft can make no guarantee regarding the amount of any payments you may receive for the ads shown on your website during this test although the purpose of the program is to monetize your site with contextual advertising.

•We would ask that you not use a third party provider to serve Microsoft ads during this test program. If this is an impossible obstacle for you, please contact me about it.

•For the purposes of the pilot, you will be limited to a single account but you may implement ads on up to ten approved web properties that comply with the Microsoft adCenter editorial guidelines.

Best regards,

XXXXXXXX (for Aditi) at Microsoft

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Google’s Talking Points For Today’s Antitrust Hearings: The Only One Who Won’t Like Our Yahoo Deal Is Microsoft

Both the Senate and House Judiciary Committees are holding separate hearings today on the antitrust issues raised by the proposed Google-Yahoo search advertising deal. (More details on the deal here). Microsoft’s general counsel Brad Smith, whose fought his own share of antitrust battles on behalf of Bill Gates, will be wagging the antitrust finger at Google. In his prepared testimony, he will claim that the deal potentially gives Google control of 90 percent of search ads, will lead to fewer choices and higher prices for advertisers, and raise serious privacy concerns for consumers. He will say:

If search is the gateway to the Internet, and most believe that it is, this deal will put Google in a position to own that gateway and the information that flows through it. Never before in the history of advertising has one company been in the position to control prices on up to 90 percent of advertising in a single medium. Not in television, not in radio, not in publishing. It should not happen on the Internet.

Google’s chief legal officer David Drummond will respond that the deal is good for consumers because they will see better ads, and good for advertisers and Web publishers because more people will click on those ads. He will maintain that Google will not control all of Yahoo’s search advertising, and will point out that Yahoo will compete in that arena, continuing to sell its own ads. It will also continue to compete in regular search. And as for privacy, Google and Yahoo will not exchange “personally identifiable information” about each user.

Here are Drummond’s talking points, which are summarized on the Google Policy Blog (where you can also find his full testimony):

* This agreement will be good for Internet users (who will see ads that are better targeted to their interests); advertisers (whose ads will be better matched to users’ interests, allowing them to reach potential customers more efficiently), and website publishers (who will see increased revenue from better-matched ads on their websites).

* Google and Yahoo! will remain vigorous competitors, and that competition will help fuel innovation that is good for users and the economy. As we’ve said before, commercial arrangements between competitors are commonplace in many industries. Antitrust regulators in the US have recognized that consumers can benefit form these arrangements, especially when one company has technical expertise that enables another company to improve the quality of its products.

* Our agreement will not increase Google’s share of search traffic, because Yahoo will continue to run its own search engine and compete in online search.

* We’re particularly excited that as part of the agreement, Yahoo! will make its instant messaging network interoperable with Google’s. This will mean easier and broader communication among a growing number of IM users, and enable users to choose among competing IM providers based on the merits and features of the services.

* We have taken a number of steps in the Yahoo! agreement to protect user privacy. As Google supplies ads to Yahoo! and its partners, personally identifiable information of individual Internet users will not be shared between the companies. Yahoo! will anonymize the IP address of a searcher’s computer before passing a search request to Google.

That last point about Yahoo anonymizing user IP addresses could set an interesting precedent. Advertisers would rather see those IP addresses freely shared across ad networks and Websites so that consumers can be targeted no matter where they go on the Web. But Yahoo and Google obviously felt it could have been a big enough issue to squirrel the deal with the government. As Congress looks at behavioral targeting in general further down the road, that could pop its head up again (even n a non-antitrust context).

These particular antitrust hearings have been brewing for a while. Google and Yahoo have tried to protect themselves against Microsoft’s criticisms by structuring the deal as a straightforward arms-length commercial agreement. And the fact that Microsoft has a lot at stake in seeing the deal squashed doesn’t make it the strongest witness at these hearings. It is not exactly a disinterested third party, since it is still trying to wrangle the search business from Yahoo itself.

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Microsoft Now Says Yahoo Came Crawling To Them (Again)

After Yahoo quickly rejected Microsoft’s latest offer to buy its search business this weekend, Microsoft has just issued its own statement in the “he-said, she-said” wars playing out in public between the two companies.

According to Microsoft, after talking to investor Carl Icahn, Yahoo chairman Roy Bostock basically came crawling on his knees to Microsoft CEO Steve Ballmer indicating that better guarantees could revive the search-only deal. (Yeah, right). Microsoft came back with a proposal that ” significant revenue guarantees, higher TAC rates, an equity investment and an option for Yahoo! to extend the agreement over a 10 year period.”

The deal broke down, partly because of Yahoo’s belief that it had to take it or leave it within 24 hours. Microsoft denies ever setting a 24-hour deadline. (Maybe Carl Icahn did?) Whatever happened, it sounds like some lines got crossed there with all the telephone tag. But what do you expect when you have a three-way negotiation going on?

Update: Here is Carl Icahn’s version of events, and Jerry Yang’s most recent talking points e-mail to the troops (all republished in full, along with Microsoft’s statement, after the break):

Here is Microsoft’s statement:

Microsoft Sets the Record Straight

REDMOND, Wash. – July 14, 2008 - On the evening of July 12, Yahoo! Inc. released a statement relating to recent discussions involving Yahoo!, Microsoft Corporation, and Carl Icahn. Microsoft believes the statement contains inaccuracies that need to be corrected. Among other things, the enhanced proposal for an alternate search transaction that we submitted late Friday was submitted at the request of Yahoo! Chairman Roy Bostock as a result of apparent attempts by Mr. Icahn to have Microsoft and Yahoo! engage on a search transaction on terms Mr. Icahn believed Microsoft would be willing to accept and which Microsoft understands Mr. Icahn had discussed with Yahoo!.

Specifically, on Thursday afternoon, July 10, Mr. Bostock called Steve Ballmer’s office to arrange a call. On that subsequent call, Mr. Bostock told Mr. Ballmer that “with substantial guarantees on the table and an increase in the TAC (traffic acquisition cost) rate, there are the pillars of a search only deal to be done.” Mr. Bostock encouraged Mr. Ballmer to submit a new proposal to Yahoo! for a search only deal reflecting these terms.

After considering Yahoo’s request and taking into account Yahoo’s previous feedback about our prior search proposal, Microsoft determined late Friday to propose an enhanced search transaction. This proposal included significant revenue guarantees, higher TAC rates, an equity investment and an option for Yahoo! to extend the agreement over a 10 year period.

Microsoft’s proposal did not include changes to Yahoo’s governance.

At the time Microsoft submitted its enhanced proposal, Microsoft asked that Yahoo! confirm whether it would agree that the enhancements were sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets. This discussion has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations. Yahoo! informed Microsoft on Saturday that it had rejected the proposal.

Jerry Yang’s e-mail to the troops, with talking points:


To: all-worldwide@yahoo-inc.com
From: jerry
Subject: over the weekend — joint microsoft/carl icahn proposal

yahoos,
on friday evening, our board received a search and restructuring proposal from microsoft and carl icahn.
in essence, this proposal would hand over to microsoft yahoo!’s search business and the rest of the business to carl icahn. our board rejected this for a number of reasons, that boil down to a determination that this deal would be disadvantageous to yahoo! stockholders. with our annual meeting quickly approaching on august 1, i want to give you an idea of what to expect over the coming days and weeks.

proposals and attacks by microsoft and carl icahn leading up to our meeting are likely to get even more contentious.

i know this could is distracting at the very least. but i know that we can count on all of you to continue to focus on what we do best — transforming the experiences of our users, advertisers, publishers and developers. i also realize that you, and our customers and partners, may have additional questions. to address these, below is a brief faq that should help.

please be assured that the board, the management team, and i are all focused on doing what’s best for the business and our stockholders. we are prepared to let our stockholders, not microsoft and carl icahn, decide what is in their best interests. and we look forward to the upcoming vote at our stockholder meeting.

thank you for your hard work and commitment to yahoo!.

jerry
**********************
Questions and Answers for Employees
Is Yahoo!’s management now considering selling off search and splitting up the company?
• Microsoft and Carl Icahn made a joint proposal for restructuring Yahoo! which included the acquisition of Yahoo!’s search business by Microsoft.

• Yahoo!’s Board rejected the proposal, concluding that delivering our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders does not make sense.

• We remain committed to being a principal in algorithmic and paid search and believe that financial benefits from our announced agreement with Google will allow Yahoo! to advance its ability to compete in the convergence of display and search advertising by allowing us to accelerate investment in sponsored search, display and web search businesses in parallel.

Does Yahoo! believe that being a principal in both search and display is the best way to maximize stockholder value?

• We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry.

• Our strategies — including our recently announced agreement with Google — are specifically designed to capitalize on this convergence.

What exactly did Microsoft and Carl Icahn propose to Yahoo!?
• Microsoft and Carl Icahn jointly proposed a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.

• The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! during the up to the one year it would take to gain regulatory approval for this deal.

• Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.
As an employee, what can I do to support Yahoo! during this time?
• We ask that you continue to focus on what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.

Additional Customer / Partner Questions and Answers
With all the commotion surrounding the Microsoft/Icahn proposal, as a customer/partner — should I be concerned that Yahoo! is taking its eye off the ball?

• Yahoo! is very focused on continuing to provide its customers and partners with the high-quality level of service and attention that they have come to expect from all Yahoo! employees, including management.

• While this public volley can be challenging for everyone, it does nothing to change Yahoo!’s fundamental commitment to maintaining the highest standards of service.

Is Yahoo!’s management now considering selling off search and splitting up the company?
• Yahoo!’s Board rejected the joint Microsoft/Icahn restructuring proposal that would have included the acquisition of its search business by Microsoft.

• Yahoo! remains committed to being a principal in algorithmic and paid search and believes that the financial benefits of our announced agreement with Google will allow Yahoo! to advance its ability to compete in the convergence of display and search advertising by allowing us to accelerate investment in sponsored search, display and web search businesses in parallel.
What exactly did Microsoft and Carl Icahn propose to Yahoo!?

• Microsoft and Carl Icahn jointly proposed a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.

• The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! during the up to the one year it would take to gain regulatory approval for this deal.

• Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.

Carl Icahn’s version of events, via his latest letter to shareholders:

July 14, 2008

Dear Fellow Yahoo! Shareholders:

Over the years I have attempted to make changes at many companies but I have yet to see a company distort, omit and twist events and facts in the manner that Yahoo! has done in their press release issued Saturday night, July 12th.

During the last week, Goldman Sachs called me a number of times asking me to relate to them any transaction that Microsoft might be interested in transacting with Yahoo! I discussed with them the possibility of doing a “Search only” deal wherein Microsoft would purchase “Search” from Yahoo! and pay Yahoo! for any searches that would originate from a Yahoo! content page. Yahoo! felt that a deal of this nature would be very interesting, but only if Microsoft would guarantee the revenue that Yahoo! now received. This would obviously be a great deal for Yahoo! because Yahoo! would, for five years, receive a minimum of the $2.3 billion they are currently receiving as long as they continued to supply the page views and affiliate traffic they now had. Heretofore, Microsoft had been unwilling to even come close to making this guarantee. However, after I negotiated with Steve Ballmer for the better part of a week, he agreed to the guarantee. He also agreed to commit $7.7 billion dollars to the transaction (consisting of a $1 billion payment for “Search”, a $2.8 billion loan and a $3.9 billion tender offer to Yahoo! shareholders). Under the transaction, Yahoo! shareholders would receive $16.25 per share in distributions (consisting of cash and securities) and be left with a content company which would have a minimum guarantee of $2.3 billion per year of “Search” revenue from Microsoft and cost saving synergies from exiting the “Search” business that Yahoo! has publicly stated would be $750 million per year (excluding the benefits from reduction of stock compensation and other non-cash items). However, Microsoft believes the synergies from Yahoo! exiting “Search” would be far superior and that Yahoo!’s 2009 GAAP operating income would exceed $2 billion. Microsoft would be making a substantial equity investment in the remaining company at a valuation of $19.50 per share. Furthermore, Yahoo! would be spared the great expense of maintaining “Search” as well as having to spend billions in developing new technology to compete with Google and Microsoft — which it is highly doubtful they would be able to do successfully. Additionally, Yahoo! would be able to avoid the great risk of seeing “Search” continue to lose market share and eventually melt away.

I spoke to Goldman Sachs and Roy Bostock on Thursday concerning the breakthrough with Microsoft. A call to discuss the details of the transaction was then set up among Microsoft, Yahoo! and me on Friday afternoon, July 11th. However to my surprise and consternation, on the Friday call Yahoo!, instead of being interested in the Microsoft offer, seemed to me to be focused on who would be running Yahoo!. Finally, Steve Ballmer suggested that we not spend the rest of Friday afternoon on corporate governance. “First tell us if you like the deal,” he said.

The Yahoo! Press Release

a. Yahoo! in their Saturday night press release makes much of the fact that they were only given 24 hours to decide on the Microsoft offer because of the time constraints relating to the proxy fight, but neglects to mention that they were offered more time if they would be willing to postpone the annual meeting for a short period.

b. Yahoo! conveniently neglects in its press release to tell you about the extremely important above mentioned guarantees that Microsoft was willing to make;

c. Yahoo! tells you in their press release that a condition of the deal was the immediate replacement of the current board and removal of top management. Yahoo! neglected to mention we were willing to discuss keeping a number of the current board members and Jerry Yang as Chief Yahoo!

d. Yahoo tells you the Microsoft proposal precludes the potential sale of all Yahoo! however, they neglect to tell you that that train has left the station in that Microsoft is no longer willing to buy all of Yahoo! with the current board overseeing the company.

e. Yahoo!’s press release states that “this odd and opportunistic alliance of Microsoft and Mr. Icahn has anything but the interest of Yahoo stockholders in mind”, raising the innuendo that I am on Microsoft’s side in this manner. That is patently ridiculous. Since Yahoo! failed to consummate a transaction with Microsoft this year, I have spent hours and hours attempting to get the parties together because I believe that it is beneficial to Yahoo! shareholders to have a deal with Microsoft and I have worked hard trying to make it happen. It is important to note that my funds and affiliates own 70 million shares of Yahoo and own no shares of Microsoft or Google while the current board outside of Jerry Yang owns only the shares they have received from Yahoo for being directors. My interests are aligned with yours and not Microsoft and I think it is in our interest to have this transaction consummated so that we can get value much in excess of the recent and current market for Yahoo! shares.

In June, Microsoft apparently made a $33 per share offer for all of Yahoo! which was met with Yahoo countering at $37, thereby rejecting the $33 offer. Amazingly, before Microsoft decided that it would not buy all of Yahoo! with this board in place, it offered $33 and was turned down. The Yahoo! press release indicates that Yahoo!, in rejecting the current Microsoft proposal, stated that it would do a deal in which the entire company was sold to Microsoft for $33 per share. It is hard to understand why it turned down $33 and is now willing to accept it. It is the same obfuscation that is so prevalent in the rest of the press release. DON’T BE FOOLED.

I believe that, just like the $33 per share offer that was refused by Yahoo! in early June, refusing the Microsoft offer for the Yahoo! search business is also another grave mistake that will be deeply regretted. Our company is on a precipice and our Board seems ready to take the risk of seeing it topple — ARE YOU, THE REAL OWNERS OF YAHOO!, WILLING TO TAKE THE SAME RISK?

The following are the details of the offer that was presented by Microsoft to Yahoo! on Friday.

$/share should:
Value to Yahoo! Shareholders ————————- No Shares Tender———-All Shares Tender

1. Yahoo! distributes $12.5B in
Asian Assets —————-$9.00 ———————$9.00

2. Yahoo! distributes $3.5B in
cash to shareholders comprised of
$1B from Microsoft for search,
$2.5B of cash on hand ————–$2.50 ——————-$2.50

3. Microsoft offers $2.8B in
preferred debt at 5% —————$2.00 ———————$2.00

4. Microsoft tenders $3.9B for
Yahoo! shares at $19.50 ———————— $2.77

5. Remaining Shares
$16.73 = effective value of shares
after tender (86% x $19.50) ——————$19.50 —————–$16.73

Total Value To Yahoo! Shareholders ———————$33.00 ——————$33.00

Search Deal Would Increase Yahoo! EBIT to over $2B in CY09 — remaining share valuation represents 14.5 x GAAP pre-tax income

– Microsoft acquires Yahoo! search assets for $1B in cash

– Microsoft is the exclusive provider to Yahoo! and its partners of paid search, contextual search and algo search for the term of the deal

– Microsoft guarantees Yahoo! the greater of:

(a) 85% net revenues for the first three years, and 70% of net revenues thereafter,

(b) $2.3B per year of after-TAC revenues scaled down in event of underperformance of Yahoo! US Homepage views and affiliate rev.

– At the end of 5 years, the agreement expires unless Microsoft or Yahoo! exercise one of the following:

- Microsoft may extend the agreement for 5 years should Microsoft guarantee $3B net revenues per year

- Yahoo! may extend the agreement for 5 years with Microsoft bound to guarantee $1.6B per year

– Yahoo! no longer needs to support the costs of employees or infrastructure of the search business.

– Microsoft will cooperate with Yahoo! to allow Yahoo! to collect data from its web search to support its display advertising business.

– Microsoft will provide Yahoo! with a limited, non-exclusive IP license for use of search IP in support of its display advertising platform.

– Yahoo! will guarantee that Microsoft’s search will retain equal or greater prominence throughout the Yahoo! site as Yahoo! search does today.

Steve Ballmer has made it clear to me that if a new board consisting of my nominees were to be elected, Microsoft would be willing to enter into discussions immediately regarding a transaction along the lines described above. If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be approving an offer along these lines for its shareholders.

PLEASE VOTE THE GOLD PROXY CARD

Your vote is important. Please act at your earliest convenience.

If you’ve already signed and returned Yahoo’s WHITE proxy card, you can revoke that vote and cast a new vote by completing, signing, dating and mailing the GOLD proxy card today.

If your shares of Yahoo Common Stock are held for you by a broker or bank, only your broker or banker can vote your shares and only after receiving your specific instructions. In that case, you are asked to complete, sign, date and mail the voting instruction form today. Please do so for each account you maintain.

If you need assistance in voting your shares, please call D. F. King & Co., Inc., which is assisting us, toll-free at 800-859-8509.

Thank you for your patience, cooperation and support.

Sincerely,

CARL C. ICAHN

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New Microsoft Offer, Quickly Rejected

Yahoo rejected a new Microsoft offer to acquire Yahoo’s search business earlier this evening. The offer, which apparently was made on Friday in cooperation with Yahoo investor Carl Icahn, was a variation on Microsoft’s previous offer to acquire Yahoo’s search business in exchange for cash, a partial stock buyout and revenue guarantees, required the complete replacement of the Yahoo board and executive management team, had a 24 hour expiration period and stated that there was no room for negotiation.

Yahoo rejected it, saying that the Google search deal they’ve signed is a better deal and adding that the requirement to replace the board and executive team is “absurd and irresponsible given the complexity of the deal.” We, by the way, agree with both points.

Yahoo formally offered to sell itself whole to Microsoft in the release as well, saying “the Board believes a whole company transaction could be negotiated and executed prior to August 1st,” and suggesting Microsoft’s original $33 offer will work just fine for them right now.

Full text of release:


Yahoo! Rejects Microsoft/Icahn Search and Restructuring Proposal
Yahoo! Suggests Microsoft Make A Proposal To Acquire Whole Company

SUNNYVALE, Calif., Jul 12, 2008 (BUSINESS WIRE) — Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, confirmed today that it has rejected a joint proposal from Microsoft Corporation and Carl Icahn for a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.

The proposal was made on Friday evening and Yahoo! was given less than 24 hours to accept the proposal, the fundamental terms of which Microsoft and Mr. Icahn made clear they were unwilling to negotiate. After reviewing the proposal with its legal and financial advisers, Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.

The Board’s rejection of the proposal was based on a number of factors, including the following:

1. Yahoo!’s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.

2. The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo! for a full and fair price, including a control premium.

3. The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo!’s remaining non-search businesses which would be overseen by Mr. Icahn’s slate of directors, which has virtually no working knowledg