IT Spot

Yahoo and shareholders suing the company don’t see eye to eye about how public some documents involved in the case should be.

The documents involve details of a severance plan Yahoo adopted after Microsoft launched its attempt to acquire the Internet company in February. Yahoo wants to keep the documents redacted, but Joel Friedlander, the attorney representing the shareholders, accused Yahoo of trying “to whitewash embarrassing documents” so they couldn’t be used to undermine its effort to fend off activist investor Carl Icahn’s attempt to oust Yahoo’s board, according to The Associated Press.

Also included in the documents are notes from a conversation between Jerry Yang and Steve Ballmer, the respective chief executives of Yahoo and Microsoft, and of comments top executives made about the severance plan, the AP said. The information was gathered during the discovery phase of the lawsuit.

A hearing is scheduled for Tuesday on the matter for the Delaware case.

The severance plan was one sticking point in discussions between Yahoo and Microsoft, a source familiar with the negotiations said.

I’m trying without luck to work up the same indignation that’s accompanied Facebook’s decision to block Google’s Friend Connect earlier in the week.

It’s become quite the big deal in the blogosphere. Mike Arrington heaped scorn on Facebook’s decision while Marc Canter was equally passionate about users getting control over their personal data. (Open is the new black.)

Facebook’s defense? Google Friend Connect “redistributes user information from Facebook to other developers without users’ knowledge, which doesn’t respect the privacy standards our users have come to expect.” (CNET News.com’s Dan Farber has a good recap of the blow-by-blow.)

I’m not sure how many people believe that explanation. Privacy is a convenient dodge, but this sounds more like land grab battle between the rival services. (Coincidentally, MySpace.com and Google also made separate announcements recently about creating a more open social Web.)

But here’s the disconnect.

From a user perspective, who doesn’t want data portability? I’m all for people taking their social graphs wherever they might like. But then there’s the reality of commercial interests, which have no interest in helping rivals. The value of a network has to do with the network effect. People go to Facebook or MySpace or Orkut because other people they also know are on a particular service and they want to connect. Sharing the users’ social graph means a rival can more easily catch up to the friend networks built by incumbent players such as Facebook.

They may allow just enough data portability to appear to be on the side of the angels. But in the absence of the Second Coming–or pressure to create a nonprofit host for personal data–there’s little chance we can expect much more.

PALO ALTO, Calif.–Hewlett-Packard wants to get hip to teens.

At an event here this week focused on teenagers and technology, Ameer Karim, director of HP’s future and innovations group for consumer PCs, said that it plans to introduce a new line of devices this fall that will be designed by teens, for teens.

“We’ve used this teen council to help us with everything from the design of the products, the user interface and the box design, even including how the Web site will look,” Karim said on a panel of executives talking about marketing to the younger generation. Representatives from Sun and Microsoft were also panelists.

“That’s a major transformation for a company like HP, which has been much more focused on an older crowd,” Karim added.

Karim did not detail what devices the company will unveil this fall. Ann Finnie, an HP spokeswoman, wasn’t familiar with the product line that Karim referenced. But she said the company generally has been trying to cater to a younger audience with products like the TouchSmart PC, a desktop with a touchscreen interface that’s designed as a home entertainment hub. It was introduced in January 2007.

Karim’s comments came during SD Forum’s second annual Teens and Tech conference, a one-day event focused on how teens are using technology to innovate, start companies, and organize around causes. The event also delved into marketers’ approach to the market, given that kids are spending more and more of their time online.

Matt Thompson, director of technology outreach and Sun’s open-source programs office, said that Sun has made a play for teens by spinning out the site Freshbrain.org, an activities Web site for teens. He said the other way Sun reaches out to kids is by making everything free. Teens, he said, are extremely sensitive to free.

“My job is to literally give things away,” Thompson said to a crowd of about 150 people at the conference, which was held on HP’s campus. “We make a long term investment in those (kids) interested in technology.”

It’s doubtful that HP will be giving anything away for free. But according to Karim, the company is hoping to define a new generation of products with the help of its teen council. And some of those products might include gaming. Karim referenced the company’s acquisition of computer game company Voodoo two years ago during his talk.

“We’re very excited. Our core focus is on how we design for this space in way that we believe will define the next generation of products,” he said.

JD Lewin, a Microsoft executive on the panel, was much more cavalier to the question of teens: “I don’t know how we market to teens.”

The Web spirit of build an audience and figure out the business model later is a great filter. It allows products and services into the wild without barriers or the need to sell advertisers on an unproven concept.

Those who can build an audience, such as Twitter and FriendFeed, and before them Google, Facebook, and dozens of others who turned into giants, have the scale to develop monetization schemes that a loyal and fanatic user base won’t summarily reject.

In the case of Twitter, the service is a hit, attracting millions of tweeters, many of whom won’t appreciate ads slipped into their Twitter stream.

Here’s a solution. How about paying for what you like to use. Much of what gets sent via Twitter is a form of self-advertising. If you like Twitter so much, how about paying $5 a month for the privilege. Of course, the fee would have to include a quality of service guarantee and rebates for downtime. And, you would expect the owners of the Twitter or other services to be priced competitively, or at least reasonably if no serious competition exists.

In fact, why aren’t people willing to pay for what they use? Public radio has the same problem, hence the tedious pledge drives.

A mere $5. Around here, that’s less than a day’s worth of coffee, a bacon cheeseburger with fries, a gallon or so of gas, or even a lowly beer. And you would get unlimited tweets and the service doesn’t go down, or at least it’s up most of the time.

From its inception, the Web has been about free (not like beer) and mostly advertising-supported. You might you say, those $5-per-month fees could add up. You might be paying $25 per month for services you like to use, free of advertising or with ads. Then back off on the steak burritos, country omelets, beet salads, beers, or the bags of popcorn at the movie. The subscription model could work.

Talk about missing the forest for the trees. With everyone and their mother-in-law predicting a coming wave of acquisitions of so-called new media companies by old media outfits, that future’s already snuck up on us.

In the last year:

•  Cox bought Adify
•  Hi-Media Group bought Fotolog
•  Time Warner’s AOL bought Bebo, Quigo, Third Screen Media
•  Comcast bought Plaxo
•  Disney bought Club Penguin
•  CBS bought Last.fm, CNET Networks, Wallstrip, Dotspotter
•  Microsoft bought 1.6 percent of Facebook
•  Hearst bought Kaboodle and Answerology
•  Jupiter Media bought MediaBistro
•  News Corp. bought Photobucket, Beliefnet
•  The New Times bought Freakonomics blog
•  Forbes bought Clipmarks
•  Discovery bought Treehugger

If you use News Corp.’s 2005 acquisition of MySpace.com as the starting point, the list gets longer. Going back that far, there’s been more than $19 billion worth of significant mergers between the biggest old and new media players in the online media industry.

After Microsoft launched its late January takeover bid for Yahoo, a lot of new media start-ups hoped it would trigger a chain reaction where they’d be able to cash out.
It’s easy to understand their anxiety. A recent report from PubMatic concluded that:

• On average, Web site monetization dropped by 23 percent from 49 cents in March to 38 cents in April.

• Among the verticals, social networking led the plunge with monetization dropping 47 percent, from 37 cents in March to 19 cents in April, below January lows of 22 cents. Entertainment monetization dropped 17 percent from 40 cents in March to 33 cents in April. Gaming and sports were down marginally (4 percent and 5 percent, respectively). Technology remained relatively flat at 83 cents in April vs. 82 cents in March, but is still off January highs of 92 cents.

Maybe a bunch will still cash out before the window slams shut but the more interesting question is why more media giants haven’t built their online empires organically? The snarky explanation is that they’re too hidebound and slowed by bureaucracy to think creatively about this stuff. But that’s too easy and misses the bigger point.

I think Piper Jaffrey’s Gene Munster offers a better answer when he wrote in a recent report that Google “has forced old media companies to realize they must act immediately or lose relevance in the Internet space.” He may be right about that. These companies typically came late to the party when they recognized that lots of their customers (and advertisers) were heading to the Internet. And thanks to the Yahoo novella, we’ve seen how even a company like Microsoft, which doesn’t fit under the “old media” label, finds itself scrambling to find answers to the Google question.

I just don’t know whether the land grab strategy will be enough to restrain Google’s growing appetite. Maybe it is, but I wouldn’t want to take that bet.

William Neukom, the Microsoft lawyer best-known for his role in the landmark antitrust case against the software giant, is now set to take on a bunch of Pirates (and Dodgers and Cubs).

Neukom, according to a report Friday in the San Francisco Chronicle, is set to become managing general partner of the San Francisco Giants, replacing Peter Magowan, who plans to step down from that role at the end of the season.

A Giants representative did not immediately return a call seeking comment. Neukom, who has also headed the American Bar Association, announced in November 2001 that he would step down as Microsoft’s top lawyer that same year, to be succeeded at the company by Brad Smith.

Neukom had been a partner at the law firm of Bill Gates’ father before joining Microsoft in 1985, and he returned to the firm after leaving Microsoft in 2002.

The social Web is going through some birthing pains (see Techmeme). In the name of data portability, the Facebook, MySpace and Google made announcements last week about creating a more open social Web. For the most part, they are press releases and not yet fully released into the wild.

(Credit: www.travel-tuscany.net/)

Yesterday Facebook suspended involvement with Google’s Friend Connect, claiming that it redistributes user information from Facebook to developers without users’ knowledge, violating the company’s terms of service.

Google responded that Friend Connect is designed to keep users fully in control of their information at all times. “Users choose what social networks to link their Friend Connect account to. (They can just as easily unlink it.) We never handle passwords from other sites, we never store social graph data from other sites, and we never pass users’ social network IDs to Friend Connected sites or applications,” a Google spokesperson said.

Full openness in the colonization of the social Web is counter to the instincts to companies funded by venture capitalists and with quarterly earnings to report. The companies are conflicted. On one hand, they want to maintain walled or semi-permeable gardens and find ways to keep users from defecting and the money from evaporating.

On the other hand, Facebook, Google and MySpace are part of the Web generation, fueled by young people who value openness and advocate users having control of their data.

At this juncture, all the major social networking players recognize that the walls separating them are crumbling, but they haven’t agreed on how to implement global openness.

Taking a historical perspective, the social networking community hasn’t formed its Continental Congress to unite the colonies with a common vision and approach for openness. It’s a political and economic, not a technical, issue. The technical building blocks, such as OpenID, oAuth and OpenSocial APIs. for an open social Web are taking shape.

The complexities of an open social Web, allowing for granular control by users over their online identities and information, will require a lot of new thinking about user scenarios and experimentation.

The Data Portability Project is developing guidelines and has the endorsement of the big social networking players. But endorsement doesn’t mean they are gathered together to create a common social layer for the Web. It’s time for the social networks, like the 13 colonies in 1774 banding together to be free of British authority, to unite and manifest that Web is by and for the users.

Editors note: This post was updated Friday, May 16, at 5:50 a.m. to include a letter sent to Yahoo executives concerning the proxy fight.

With billionaire investor Carl Icahn launching a proxy fight Thursday to unseat Yahoo’s board of directors, Yahoo CEO Jerry Yang issued a letter to employees, as the Internet pioneer gears up to do battle.

This letter is likely to be the first in a string, as the proxy fight heats up at a rapid pace given Yahoo’s shareholders meeting is less than two months away.

To: all-worldwide@yahoo-inc.com

From: Jerry

Subject: today’s news

yahoos,

today carl icahn announced his intent to nominate a slate of ten directors to take control of our board of directors at this year’s annual meeting. we sent him a letter in response, which we made public in a press release. i’m attaching a copy of that press release, including the full text of our letter, and you should read it carefully.

we always want to hear the views of our stockholders, but you should know that mr. icahn’s letter reflects a significant misunderstanding of the facts about the microsoft proposal and the diligence with which our board evaluated and responded to that proposal. we believe our board has the independence, knowledge, experience and commitment to maximize value for all of our stockholders. yahoo! is a great company with a truly unique set of highly-valuable assets that is growing, profitable and executing well on its strategic plan to enhance our leadership position in online advertising. our solid results for the first quarter of 2008 are a testament to this.

today’s events will undoubtedly draw a lot of media attention and there will be lots of speculation about what happens next for yahoo!. i ask all of you to put aside the rumors and speculation and stay focused on the business at hand and what we do best — transforming the online experiences of our users, advertisers, publishers and developers.

i know you all have a lot of questions and so i’ve also attached some faqs that will address some of your questions. as we’ve said before we’ll do our best to continue to update you as new information becomes available. thank you again for your continued hard work as we work together to make yahoo! a stronger leader in the online marketplace and an even better company.

jerry

FAQs

Can stockholders nominate directors to the board?

Stockholders, as equity owners of the Company, have the ability to nominate one or more directors for election to a board at the Company’s annual meeting as long as they comply with the requirements contained in our bylaws. Under our bylaws, today was the last day that a stockholder could nominate a candidate for director.

How long will all this take?

We can’t speculate on how events will develop at this time, but we plan to hold our annual meeting in a couple of months.

I ask all of you to stay focused on the business at hand and what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.

What’s our next step?

We will file preliminary proxy materials with the SEC that will describe the matters to be voted on, including the Company’s nominees for election to the board, and the board’s recommendation. Once those materials are cleared by the SEC, we will mail them to our stockholders.

In the meantime, we should remain focused on doing what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.
We will continue to update you as information becomes available but please remember that we are subject to various legal restrictions on what we can say and when we can say it.

What can employees do?

We ask you to continue to put aside all rumors and speculation you may be hearing. None of us should allow external reports to shift our focus away from doing what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.

* * *

And here’s what Yang wrote to all Yahoo senior vice presidents and above, outlining not only what the company has done to respond to Icahn but also highlighting “talking points” for employees.

Yahoos looking to get a jump on what your manager may be saying to you on all of this, take note below…

To: all-svps-and-above@yahoo-inc.com

From: Jerry

Subject: our response to carl icahn

leaders,

as you know, carl icahn today announced his intention to nominate 10 directors to take control of our board of directors at our 2008 annual meeting.

this afternoon we issued our response to mr. icahn and are sending an email to all employees updating them on these recent developments. a copy of our response, including the letter to mr. icahn, is attached. i urge you to read it.
as we outline in our letter, we believe our independent board has more than demonstrated the fact that it has the knowledge, experience and commitment to maximize value for all yahoo! stockholders.

i will be scheduling a call with you soon. in the meantime please find below some talking points for you to use with your teams.

jerry

Talking Points

* Carl Icahn today announced his intention to nominate 10 directors to take control of our board of directors at our 2008 annual meeting.

* We believe much of what Mr. Icahn said today reflects a significant misunderstanding of the facts about how hard our independent board has worked–and continues to work–to maximize stockholder value. We believe our independent board has the knowledge, experience and commitment to maximize value for all Yahoo! stockholders.

* Soon, we will file preliminary proxy materials with the SEC that will describe the matters to be voted on at the annual meeting, including the Company’s nominees for election to our board of directors, and the board’s recommendation. Once those materials are cleared by the SEC, we will mail them to our stockholders.

* Stockholders, as equity owners of the Company, have the ability to nominate one or more directors for election to the board at the Company’s annual meeting as long as they comply with the notice requirements contained in our bylaws. Under our bylaws, today was the last day that a stockholder could nominate a candidate for director.

All Yahoo! stockholders of record as of the closed of business on June 3, 2008, the record date for the annual meeting, are entitled to vote on the election of directors at the annual meeting of stockholders.

* There will be lots of media attention and speculation about what happens next for Yahoo! We ask that you put the rumors and speculation aside and stay focused on the business at hand. We are at a very important time in our Company’s history.

* Yahoo! is strategically positioned for accelerating growth and profitability because of our powerful combination of assets: our global brand and scale, unmatched audiences, global leadership in online advertising, strategic positions in Asia, leadership in mobile and emerging markets, and world-class people and technology.

* The Company continues to execute well against its strategic and financial plan.

* Our board has explored and continues to explore a variety of strategic alternatives and remains committed to considering any alternative intended to maximize stockholder value.

* We’ll do our best to continue to update you as new information becomes available but please remember we are subject to various legal restrictions on what we can say and when we can say it as we work through this situation.

* Thank you again for your continued hard work.

After the list of losers they pawned off in the lead-up to the Internet bust, I nearly always distrust the pronouncements of venture capitalists about the future. Of course, why hold a grudge? Isn’t that the price you pay in a hit-and-miss business? For every few WebVans, there’s always a Google to convince the world that these guys really know how to read the tea leaves better than most folks. I suppose so.

So it was that I was especially curious when the Churchill Club earlier this week invited some of the A-List venture capitalists in Silicon Valley for a panel discussion on the top ten tech trends. (Eric Savitz kept good notes in his recap of the evening.) Most of what got offered up was unexceptional, but one comment in particular from Josh Kopelman may turn out to be one of the most prescient forecasts of the year. I’m actually hoping he’s wrong because Kopelman’s prediction scares the pants off me.

Vinod Khosla: Privacy is a red herring

Kopelman presented a scenario for the rise of the “implicit” Internet. I’m simplifying, but he was referring to the vast web of personal data which until now has existed relatively undisturbed in different corners of the data world. For example, you may have made a reservation over the Internet one day, or bought a book from an online reseller on another. But that that data is going to get collected from heretofore separate “silos” as companies which figure out ways to break through the barriers and deliver information based on that implicit cyber data.

That shouldn’t strike anybody as a pipe dream. It’s already happening in small ways and it’s an idea that VCs will be in a hurry to fund. Some, though perhaps not all. Roger McNamee, who also participated in the panel, pointed out the obvious elephant in the room. Not only might Facebook know what I’m doing, he said, “but the Chinese government also knows.” True enough. And not just the Chinese. Any government.

Vinod Khosla, who also took part in the discussion, was less impressed by the obvious privacy objections. Sounding a lot like his former partner in arms at Sun Microsystems, Scott McNealy, he described this as a big opportunity, giving short shrift to nitpickers like me. “Privacy is a red herring,” he said. “There are rules and laws and ways to address the privacy issue.”

Maybe he’ll be proved right but that’s still one helluva leap of faith. If the experience of the last several years teaches anything, it’s that the best of intentions often get sacrificed to political expediency. I know what Khosla wants to sell, but isn’t it better to take a hard second look at the price before committing? Of course, good luck trying to tell that to the herd once it picks up the scent.