According to numerous sources close to the situation, Yahoo CEO Marissa Mayer recently met with top execs at Hulu, the premium video service whose big media company owners have been considering selling it for some months.

Sources said Yahoo is “in the process,” although the Silicon Valley Internet giant has not made any kind of formal bid. Other players whom sources said are considering purchasing all or parts of Hulu include: Former News Corp. COO Peter Chernin, who now has a successful and well-funded multimedia and investment company called the Chernin Group; Guggenheim Partners digital arm, which is led by former Yahoo interim CEO Ross Levinsohn; and Amazon.

Sources said Mayer also had an extensive getting-to-know-you meeting, which was apparently not held at Hulu’s offices in Santa Monica, Calif., along with COO Henrique De Castro. The discussion is taking place in the wake of Yahoo’s failed bid — largely engineered by De Castro — to purchase a majority stake in France Télécom’s Dailymotion video service, after a top French government official said Yahoo could not own 75 percent of the company.

Had the deal — which was reportedly valued at $300 million — gone through, it would have been the most significant by Mayer since she took over at the company last July. Thus far, she has limited her purchases to small mobile startup.

While the meetings with Hulu are only preliminary, Yahoo has been to this video rodeo before, having seriously considering buying Hulu when it was previously being shopped by its owners, News Corp., Disney and Comcast. (News Corp. also owns this site.)

Of course, if Yahoo’s interest becomes more serious, Mayer will have to make important visits to top execs at those media giants, since they control the rights to critical content, and thus Hulu’s value.

As Peter Kafka noted in a previous post about Hulu’s possible sale, “much hinges on the licensing rights News Corp., Disney and Comcast would provide for the money-losing site, as well as what happens to the $300 million debt its owners have taken on in the last year.”

Without those rights, Hulu by itself is a very pretty Web site and video platform, but not worth the billions it would be with very long-term television rights, content that attracts users. Currently, sources said its media owners are offering two to three years of rights, with a lot of flexibility over removing content from the site, which is not quite as attractive a deal (to say the least).

But video is a key component of Yahoo’s strategy going forward. Along with mobile efforts, Mayer has explicitly told investors that video was a key to company under her tenure.

Coincidentally, today in an onstage interview at a Wired conference in New York, Mayer broadly addressed the video issue when asked a question about the topic, noting it was important across all of Yahoo’s properties.

“I think video is really important … video is something that we’re all innately designed and born to experience, everyone is born being able to watch and to hear,” she said. “Video is just this amazing format.”

Mayer would know that well, having been at Google when the search giant bought YouTube, ironically snatching it at the last minute from a competing bid by Yahoo, which was then led by Terry Semel. Since then, YouTube has become the most important and powerful player in the space by far.

Yahoo, despite being one of the largest video players on the Web, has mostly been a lackluster competitor in the arena, pinging over the years from creating original content to doing branded deals with media companies, but never establishing a major beachhead with consumers as Hulu did from scratch.

Short of a full acquisition, there may be a way for Yahoo to partner and invest in Hulu, instead of buying it outright that works for all sides — owners get a new owner to foot part of the bill and also increase distribution, and Yahoo can claim that it’s providing users with exponentially more content that would help Yahoo’s long-declining engagement problem.

Sources said News Corp. and Disney have mulled scenarios where one or both companies hang on to the site, while Comcast has no control over Hulu’s fate, having given up its management rights to the site as a concession to federal regulators.

But the strength of the Hulu brand is clear and it has had some success in building a more significant business. While a lot of its video offerings are free, about four million people are paying for a Hulu Plus subscription.

Still, Hulu’s strength might be lagging, especially given after talented founding leader Jason Kilar recently left. Last year, Hulu was a top 10 video site, according to comScore. No longer — in a report in March, it had dropped out of the top 10.

While this likely has more to do with methodology than real decline in Hulu ratings, it does show that while it’s the biggest thing Yahoo could buy or invest in, Yahoo itself has plenty of video views, many more than Hulu.

The question for Mayer then is how much of Yahoo’s multi-billon-dollar cash kitty she wants to bet on a big video play. She might also be considering buying several smaller ones, said sources, with Yahoo having also looked at some smaller video sites, including Blip and Grab Media.

A spokeswoman for Hulu declined to comment and Yahoo PR has not responded to a query for comment (if ever).

Longtime Yahoo techie Laurence “Laurie” Mann, who has recently been SVP of engineering operations at the Silicon Valley Internet giant, has been given the new job of heading its search efforts, according to sources inside the company.

The appointment by CEO Marissa Mayer, also announced in an internal memo last week, puts Mann in a key position at Yahoo, given the need to fix its troubled search partnership with Microsoft, which was struck in 2010.

That is likely to come under great pressure in the days ahead, given that its performance has not been as expected, although that did improve in Yahoo’s most recent quarter.

Still, despite the improvement, Mayer called attention to the overall problem at a recent appearance at an investment conference.

“One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other,” she said. “We need to see monetization working better, because we know that it can, and we’ve seen other competitors in the space illustrate how well it can work.”

By competitors, Mayer meant Google, whose share of the search market is close to 67 percent. Microsoft has just above 16 percent now, and Yahoo above 12 percent, a near flipping of share from two years ago.

Mann, who came to Yahoo in 2002, had been one of the execs at Yahoo who worked on the original deal under former CEO Carol Bartz, vetting the terms of the agreement for the company. While he has a degree from Canada’s University of Regina in business administration and computer science operations research, he is better known at the company for his deal-making and negotiating skills than as a techie or product exec.

That will be important, given that the end of the performance guarantee that Microsoft has had to pay to Yahoo since the partnership began comes in April.

Sources at Microsoft said the company is likely to extend the agreement without major concessions, but that any efforts to end the overall deal will be difficult for Yahoo.

“There is what [Yahoo] wants, and what’s possible,” said one person close to the situation.

In his new job, Mann will be in charge of improving the situation, which he has had some experience with. Mann, said one source, “used to spends hours at night on the phone with Microsoft trying to get concessions from their lack of RPS achievement,” referring to revenue per search.

Whether that means he can fix the situation — either by extricating Yahoo from the deal or improving Yahoo’s search experience to boost revenue and market share — is unclear. Mayer herself has a lot of search product chops from her time at Google, so she is expected to play a dominant role in the arena.

Another important effort for her, obviously, is still recruitment, given that a number of her choices for top product and tech jobs at Yahoo have been longtime veterans who were in place when the company was experiencing its continuing downward slide.

Among her options is buying a small search company, trying to end the Microsoft deal and perhaps strike another one with Google, or even reenter the search business with innovative engineers.

That is a big job. When Mayer was hired last summer, it was thought that she would bring in talent to reinvigorate Yahoo’s top echelons from outside the company.

But, for the most part, that has not happened, and she has appointed a lot of Yahoo’s longtime veterans to important roles in the turnaround.

For example, Mayer brought back Jay Rossiter to run platforms, appointed Scott Burke to head advertising tech, and now has put Mann into a top job in search — all of whom report directly to her on her executive staff.

This week in Las Vegas, the new management team running Yahoo — including CEO Marissa Mayer — is at International CES to schmooze with big advertisers and convince them that Yahoo is the place to put large chunks of their marketing budgets.

One of the longtime selling points of the company is the sheer size of its audience, especially for the key money-making parts of the site — the homepage, Yahoo Mail and search.

But private stats from comScore show that those three areas have continued their longtime decline over the last year, in some cases dropping significantly. In November and December, for example, compared to the same two months a year ago, U.S. search was down 28 percent and 24 percent respectively, while mail was down 16 percent and 12 percent.

This matters a great deal, since the troika of homepage, mail and search have been the critical driver of the Yahoo value ecosystem for advertisers.

The impact of those drops is felt all over Yahoo, whose music, movie, games and travel site have also seen massive drop-offs in traffic year over year in those same months.

Stopping the decline is critical for Yahoo, since Mayer herself has underscored the need for size in her pushing for new businesses at Yahoo that are 100 million users in size and/or have revenue prospects of at least $100 million.

While this is a lofty vision, the reality of traffic falloffs on key properties is a vexing issue, especially since they remain its main source of revenue and also an important element in launching future products Mayer is promising will turbocharge the company.

It’s not that Yahoo is not huge, especially compared to most sites on the Web.

As one of the top Internet brands, according to a recent Nielsen report, the average number of total monthly unique visitors for the longtime Silicon Valley Internet company in 2012 was 141.6 million, No. 3 behind Google and Facebook in the U.S. market. Similar rankings were reported by comScore, which placed Yahoo at the No. 2 spot after Google, with 171.4 million monthly visitors in November.

But, for many years, traffic to those important consumer destinations of Yahoo has been on a clear and unstopping decline, statistics (usually from comScore) that the company nonetheless always dutifully puts in its earnings slides — see below — for investors to get some idea of the major and vexing issues facing the company.

That was suddenly ended in the last quarter with the engagement slide removed from Yahoo’s public deck entirely. Not all companies include such stats, so when I inquired as to why the company had made the change, Yahoo PR never returned my phone call.

But it’s not hard to guess the reason for the shift — the numbers were not good and they called more attention to Yahoo’s glaring challenge, which is getting users reengaged with its products by creating what Mayer has dubbed several times “delightful” experiences.

According to numerous sources, that has also been the case within the company too, with the new regime restricting an internal transparency initiative pushed by former Chief Product Officer Blake Irving that shared product performance numbers with the top 100 leaders at Yahoo.

And while it’s an interesting strategic choice, several sources inside the company this week urged me to get ahold of increasingly worrisome numbers from comScore — available to its private clients — comparing November 2011 to November 2012 and also December 2011 to December 2012 at home and work in the U.S.

So I did, getting the same stats from numerous sources — numbers that a spokesman for comScore confirmed were correct.

And, as promised, they are worrisome indeed.

In November 2012, compared to November 2011, the monthly unique visitors to the homepage declined 17 percent to 91.8 million from 110.9 million; Yahoo Mail dropped 16 percent (from 92 million to 77.7 million); and Yahoo search dropped 28 percent (from 93.3 million to 66.9 million).

Also off significantly for all three areas, often by one-third, were a plethora of other stats: Percentage of reach, total minutes, total page views, total visits and more.

One of the only bright spots for Yahoo was the relatively small Flickr sites, which were up 37 percent — 26.7 million versus 19.4 million — in unique monthly visitors year over year. The photo-sharing site — which has been getting a much-needed refresh — was also up in all other stats.

But Flickr — which Mayer (pictured here) has laudably touted and supported after years of inexplicable neglect — is not a money-maker for Yahoo, even if its return does burnish the company’s tech and innovation cred.

In December 2011 to December 2012, the homepage was more stable, gaining four percent in monthly uniques from 109.4 million to 114.2 million, but with other key stats both rising and falling. Total visits were up 14 percent, for example, while average minutes per visit was down 13.6 percent.

But the trouble for mail or search continued, off 12 percent (89.9 million to 78.7 million) and 24 percent (88.7 million to 67.4 million) respectively in monthly uniques, with similarly major declines in all other stats.

Mail recently got a refresh too under Mayer, despite some recent security glitches, so new stats will show if that will help stem the declines. Search is another story all together, with Yahoo in what can only be described as a dysfunctional partnership with Microsoft that numerous sources tell me Mayer is seeking to end.

The homepage, too, is undergoing a redo, with a design that has a decidedly more mobile and social feel, and pushing an ethos of Yahoo becoming a hub for content discovery. It is hoped the new look will boost traffic relatively quickly from its current downward trajectory.

To be fair, there can be lots and lots of reasons for these declines, although most of Yahoo’s competitors are, at worse, seeing a flattening of growth and not outright declines.

And sometimes Internet sites complain that services like comScore undercount, although Yahoo had previously used the firm in its public documents. More to the point, as multiple sources within the company note, the stats are directionally correct in that they closely track with internal Yahoo numbers.

Which is to say, traffic is going down rather than growing. That is clearly why Mayer has loudly stressed mobile since arriving at Yahoo, an area not included in these numbers that many sources said has strong growth to about 70 million monthly unique visitors via its apps and mobile-enabled Web offerings.

But unlike the homepage, mail and search — which push and pull traffic all over Yahoo and are responsible for most of its current monetization — mobile also makes very little money now. And Yahoo — unlike Facebook, which recently did — does not break out mobile results.

So, it will be interesting to see if the company does so when it reports fourth-quarter earnings on January 28 and also if it says anything about continued traffic declines of its traditional Web business in the period and the impact on revenue.

Still, there are lots of ways to counter declining or flat revenues, even with declining traffic — via cost cuts, efficiencies, charging more and selling assets (as Yahoo did in the last quarter). And Yahoo has ably managed to keep its operating margins growing over the years, despite both the declines in traffic and moribund growth in its revenue.

But the real and only fix is the drastic fix to existing tentpoles Yahoo has and the creation or acquisition of products that excite consumers and, therefore, advertisers.

It’s not an easy thing, of course, as well-known venture capitalist Ben Horowitz recently wrote in his blog about the need to focus on products over building and improving culture — one of Mayer’s other big initiatives at Yahoo.

Wrote Horowitz in what I consider one of the clearest articulations of what it takes to win for startups, as well as big companies like Yahoo:

“The primary thing that any technology startup must do is build a product that’s at least 10 times better at doing something than the current prevailing way of doing that thing. Two or three times better will not be good enough to get people to switch to the new thing fast enough or in large enough volume to matter. The second thing that any technology startup must do is to take the market. If it’s possible to do something 10X better, it’s also possible that you won’t be the only company to figure that out. Therefore, you must take the market before somebody else does.”

If you want to take a gander, here are some more of those old Yahoo quarterly engagement slides, which were recently eliminated from its presentations:

(Note: I reached out to Yahoo’s outside PR firm — since they do respond to queries — and also some company execs to get a comment on this story, but so far there has been none.)

Some news cannot wait, of course, and sources at Apple said the company had planned to release news of the sudden exit of Scott Forstall, one of its major execs, this afternoon.

Maybe so, but it’s also unusual timing. Due to Hurricane Sandy — which was poised to hit landfall in central New Jersey just as Apple made its announcement about the iOS mobile software chief’s leaving, along with that of Apple Store retail head John Browett — Wall Street reaction to what appears to be a major management move by CEO Tim Cook will not take place until at least Wednesday.

That’s because the massive storm has led to the closure of the stock markets today and tomorrow, leaving investors to mull on the major reorganization without a lot of ability to react.

Apple shares closed at $604 on Friday, up about 49 percent over the past year. Its stock had declined slightly recently, after last week’s quarterly earnings did not meet the enormous profit expectations of Wall Street. Still, Apple had — for anyone else — a blockbuster fourth quarter.

The tech leader reported $8.67 per share of profit on sales of $35.97 billion.

How the departure of Forstall and, to a much lesser extent, Browett (who has been a largely unpopular exec since he was hired a year ago), will be greeted by shareholders when markets open should be interesting.

On one hand, Forstall has been a major exec at the company for a very long time, in charge of key areas of success for Apple, including the software for its hugely popular iPhone and iPad. Forstall has even been called CEO-in-waiting in some media accounts.

That said, many sources report that he has wrangled with other top execs, including Cook, and he has been known as someone with a doesn’t-play-well-with-others personality. One source told me today that Forstall had made numerous “open challenges” to the Apple leader over the last year.

While that’s not necessarily a negative at Apple — the late CEO and co-founder Steve Jobs was also someone who did not suffer fools or even simple mistakes among trusted staff — the recent troubles as it replaced Google’s mapping software with its own had clearly tarnished Forstall’s image.

In addition, while Apple does great at hardware, as well hardware/software integration, it has often fallen down in other key software efforts, such as MobileMe, iTunes and more.

This is not all Forstall’s fault, of course, but his sudden departure — which will take place officially next year — means that Cook is consolidating control over the top management.

Thus, the did-he-jump-or-was-he-pushed meme will doubtlessly increase over the next few days. Pushed seems to be the consensus so far.

But here’s a little insight into Apple’s often opaque culture to better discern management Kremlinology there: iTunes is still advertising competitors’ maps instead of its own failed product, and Forstall got no stage time at Apple iPad mini event last week.

Clearly, the removal of Browett, who had made a series of moves that were negatively greeted by Apple’s retail unit, will make Cook look decisive, especially since he had hired him. But whether that extends to how the influential Forstall was dispatched — and it looks like he was — will be another story to grok for Wall Street.

As most readers know, I love a good internal memo from Yahoo — and now I have landed a really meaty one.

It’s the “Yahoo! Three-Year Product Strategy” plan, a 21-page report that was completed in mid-2011 by a team headed by former product head Blake Irving.

While it is a year old — and five CEOs ago (no, really) — it’s an important read since it tracks closely to the strategic vision that Yahoo’s latest CEO Marissa Mayer discussed earlier this week at an all-hands employee meeting and, according to sources, is very similar to one she seems to be pursuing.

That includes a focus on personalization, mobile, social, improving Yahoo’s advertising tech platforms and more.

And here’s the centerpiece of goals — called “Five Strategic Elements” — from the Irving memo:

1. Infuse deep personalization using science and data into every consumer and advertising experience we build.

2. Delight our customers with best-in-class products, iterating frequently for constant improvement.

3. Build for connected devices first with localized, in-context, multi-screen experiences in mind.

4. Power real social relationships with features that enable 1:few conversations around content.

5. Build a digital media ecosystem that creates a premium marketplace for advertising and content and distributes Yahoo! experiences across the Web.

Sound familiar?

In fact, at the event’s Q&A part yesterday, one staffer specifically pointed out that her broad presentation to employees sounded a lot like the one Irving had proposed the year before.

Since that was never truly implemented, due to never-ending management crises, the obvious question was asked: “Why would things be different this time?”

Mayer answered that the execution against that strategy wasn’t good and she would have a better model to pull it off.

The memo, embedded in its entirety below, is really instructive to use as a possible roadmap, outlining Yahoo’s challenges, as well as the competitive landscape.

Noted the report, quite clearly: “Yahoo! does not have an audience problem, as we are growing on pace with the Internet. Yahoo! does, however, have an engagement problem, as our share of time spent is flat, relative to our competitors.”

It’s aim is to fix that by building the “One Yahoo! experience, in which each of our current and future products fortifies the whole.”

Easier said than done, especially in building up its ad tech business, as the report adds, zeroing in on its most potent rival:

“To defend and grow our share of the premium advertising market, Yahoo! must continue investing to reach parity where necessary and achieve sustainable differentiation against Google with our premium marketplace and technology stack.”

There’s a lot more than that, so dig in to the document, which suggest a whole lot of spending to turn around Yahoo.

Since Mayer is well on her way in that department — including bouncing CFO Tim Morse, who was very bottom-line wary — more on that, next!

You must now download the full report here, which was removed from DocStoc here after a takedown request from Yahoo’s lawyers.

A hot Internet company poised for an even hotter IPO is attacked in court by a competitor whose lunch it has been eating.

Sound familiar? Actually, it’s just as much Google in 2004 as Facebook yesterday.

What the pair have in common is Yahoo, for whom this kind of patent infringement lawsuit is a whole lot of been there, done that.

In Google’s case, Yahoo was suing the then-smaller company over search patents from its Overture acquisition. The pair settled 10 days before the Google IPO, with Yahoo getting 2.7 million more shares of that stock, which it then sold off relatively quickly.

As part of the settlement from a lawsuit started in 2002, Google licensed U.S. Patent No. 6,269,361, entitled “System and method for influencing a position on a search result list generated by a computer network search engine,” which was owned by Yahoo Overture subsidiary.

In plain terms, the patent was over its key pay-for-performance service, which was at the heart of Google’s business of allowing bidding for search results placement related to relevant keywords.

In Facebook’s lawsuit, Yahoo is alleging intellectual property violations by the social networking giant, and is also taking credit for Facebook’s success.

The 19-page lawsuit over 10 patents — related to advertising, privacy, customization, messaging and social networking — comes as Yahoo is seeking to right itself under new CEO Scott Thompson.

“Facebook’s entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo’s patented social networking technology,” Yahoo’s lawsuit reads, in part.

(Cue the movie script: If Yahoo had invented Facebook, it would have invented Facebook.)

That includes, Yahoo alleges, Facebook’s popular News Feed, advertising methods, privacy settings and more. The company adds that Facebook has been “free riding” on Yahoo’s intellectual property, and that royalty payments alone will not suffice.

What happens next today will be interesting — way back when, Google finally gave in in the delicate game of chicken with Yahoo, at the last minute.

But it’s not clear whether Facebook will flinch — or not.

Until we find out, here’s the press release from the 2004 settlement between Yahoo and Google to peruse:

Yahoo! and Google Resolve Disputes

SUNNYVALE, CA & MOUNTAIN VIEW, CA — August 9, 2004 – Yahoo! Inc. (Nasdaq: YHOO) and Google Inc. today announced that the companies have resolved two disputes that have been pending between the companies.

Under the terms of the settlement agreement, Google will take a license to U.S. Patent No. 6,269,361 and several related patents, held by Yahoo!’s wholly-owned subsidiary, Overture, and Yahoo! dismissed its patent lawsuit against Google. The two parties have also resolved a dispute regarding shares issuable to Yahoo! pursuant to a warrant to purchase Google shares in connection with a 2000 services agreement.

In connection with the settlement of the warrant dispute, the patent lawsuit, and in payment for the license, Google issued shares of its Class A common stock to Yahoo!.

People familiar with the matter say that AMD — for decades a distant second to Intel in microprocessor chips — also flirted with the possibility of buying Calxeda, another start-up developing technology for energy-efficient servers.

Read the rest of this post on the original site

In answer to a direct question about whether his company was going to buy Yahoo at a forum at Stanford University in Silicon Valley this afternoon, Alibaba Group Chairman and CEO Jack Ma said: “We are very interested.”

Said Ma: “We are very interested in Yahoo. Our Alibaba group is important to Yahoo and Yahoo is important to us … All the serious buyers interested in Yahoo have talked to us.”

Finally, at least one crystal clear answer in the confusion at Yahoo. More importantly, it is the first time Ma has indicated that he wanted to be a principal player in any deal around Yahoo rather than an element of a buying group.

Later, in answer to a question I posed about how he was going to do that, Ma said he wanted the “whole” company, but that the effort was complicated and included a number of players.

Again, he said: “We are very, very interested.”

I also asked him if he had visited Yahoo in his trip to California, which Ma said he has not in 15 days here so far. He said he has mostly been sleeping and eating, as part of a longer-term visit to the U.S.

Ma’s declaration came as part of a lively closing keynote speech at Stanford University’s Graduate School of Business, where he talked about the Chinese Internet company’s growth, focusing on how China is the next great Web economy.

Talking about competitors such as eBay, which have tried to enter the huge Asian market, he joked that “eBay might be sharks in the ocean, but Alibaba is a crocodile in the Yangtze.”

Of course, given his presence in Silicon Valley, one topic of interest was whether Ma would be heading over to visit nearby Yahoo and what role he will play in the current internal debate over the company’s future in the wake of the ousting of its CEO Carol Bartz.

The disposition on Yahoo’s Asian assets, which includes 40 percent of Alibaba and a large stake in Yahoo! Japan, are critical to the current strategic review of the company, since they make up a large part of its market valuation.

In comparison, the value of its U.S. and other global assets are small.

When later asked about his experience of being involved with Yahoo, which made a very canny investment by Yahoo co-founder Jerry Yang in Alibaba many years ago, Ma also said that he would do it again, but not in the same way.

The same way has to do with the level of foreign ownership, which Ma has been trying to reduce in a number of ways and which Yahoo has thus far resisted.

To answer a question about the fight between Ma and Yahoo over its Alipay fight, when Ma spun it out of Alibaba, he said the situation was tense, but that today “the problem is solved and I am half-burnt.”

He was referring to a settlement, which will require a lot of growth from the still-nascent online payment business.

Ma was asked later about the biggest misunderstanding in the U.S. about China and vice versa. “Our job is not to solve the misunderstanding,” he said. “Our job is to change ourselves to solve the problem.”

In another query about his relationship with Yahoo’s Yang, Ma called him a lifelong friend and also said he appreciated how much that meant to Alibaba’s beginnings.

“But, this is business and not personal,” Ma said about the current situation. “While we appreciate yesterday, but we are looking for a better tomorrow.”

The first line, for those not mad fans of the classic movie like me, is from “The Godfather.”

The question is, though, will Ma make Yang an offer he can’t refuse?

A range of major players interested in acquiring all or a large piece of Yahoo have been prepping possible bids and have been in touch with the Internet giant’s board over the last several days.

While Yahoo has publicly said it was not for sale, according to numerous sources both inside and outside the company, it has been receptive to the interest and its Chairman Roy Bostock and Co-founder Jerry Yang have spoken to several.

Among the possible players: Silicon Valley venture firm Andreessen Horowitz, which is working with private equity firm Silver Lake, in a deal that also might include Russia’s DST Global and Yahoo’s Japanese partner Masa Son; former News Corp. exec Peter Chernin, who is partnered with Providence Equity Partners; and the possibility that Yahoo’s Chinese partner, Alibaba Group, might consider entering the fray in what could be a reverse merger of sorts.

Also being rung up by some of the parties: Microsoft — Yahoo’s advertising and search partner — which is being seen as a possibly moneybags in any deal.

The movement among these investors is against a backdrop of increasing pressure for Yahoo’s board, after it fired CEO Carol Bartz last week. In the wake of the dramatic move, shareholders have upped criticism of Bostock and the board and have been looking hard for alternatives.

Today, that included hedge fund investor Daniel Loeb of Third Point, which has a 5.1 percent stake in Yahoo. In a filing this morning, he said he might increase that amount, and described a testy hour-long phone call he had earlier this week with Bostock that ended abruptly with a hang-up from Yahoo.

Sources said Loeb called Bostock a “fool,” among other not-so-nice names, on the call and asked for Yang’s help in dumping him.

This comes as exactly no surprise, given his previously strong letter in which Loeb called for Bostock’s ouster.

Loeb has been calling out Bostock — who is also on the boards of Morgan Stanley and Delta Airlines — for a series of gaffes at Yahoo since he became chairman in 2008 (he’s been on the board since 2003).

Those have included: Yahoo’s bungled effort to stave off a takeover by Microsoft several years ago; the too-long enthusiasm for Bartz, who was hired in early 2009 and fired last week; sitting unusually still as competitors such as Facebook, Google and more have out-innovated and outgrown Yahoo; and, of course, the falling knife of a stock, which has dropped precipitously since Bostock has been in charge of the board.

As Loeb wrote in a letter he sent to the company last week:

“It is time that certain members of this Board were held accountable for its past failures and their individual roles. Accordingly, we insist that Mr. Bostock, who championed Ms. Bartz’s hiring and led the charge against the Microsoft deal, promptly resign from the Board.”

Loeb is likely to add to that later today at a high-profile investor conference in New York, where the colorful but tough-talking investor is sure to add more logs to the fire.

But it not only him. Other major shareholders of Yahoo are also in touch with possible outside buyers, seeking a change at the long-troubled company, after its shares have remained in the doldrums, its attrition rate of employees has spiked and its product pipeline has slowed to drip.

This has all been taking place — of course — during one of tech biggest and most innovative booms, in which Yahoo competitors have grown strongly.

Enter Marc Andreessen, the well-known entrepreneur who has transformed himself into one of Silicon Valley’s most powerful venture capitalists.

He and his partner Ben Horowitz recently pulled off another similar deal — with Silver Lake — to take control of a then-troubled Skype. They later flipped it to Microsoft for a large return.

Sources familiar with the situation said the pair have become increasingly intrigued by the situation at Yahoo and believe that its assets and brand are still strong, despite its management turmoil in recent years.

One problem is the huge cost of almost any kind of takeover and also the complexity, given much of Yahoo’s $18.5 billion valuation is due to its Asian assets.

The sale of those shares, as well as the selling off of some of Yahoo’s less core properties, makes for a very complicated situation for anyone.

Said one person looking at the company: “It is one of the more massive hairballs around.”

That is a common sentiment among many of those looking at Yahoo, which has hired Allen & Co. to manage the process.

Also of worry is a bid that would include too many players. Yahoo has long been plagued by indecisiveness on the part of its execs and, mostly, its board.

But one thing all the possible buyers of Yahoo, as well as an increasing number of its shareholders, agree on: The Yahoo board needs a major shake-up.

As Loeb wrote last week, which many I interviewed also echoed:

“This letter details our principled demands for sweeping changes in both the Board of Directors (the “Board”) and Company leadership, and outlines the hidden value of Yahoo, which has been severely damaged — but not irreparably — by poor management and governance.”

Airbnb, the fast-growing online accommodations service, is expanding an offering to allow users to more easily book longer rentals of a month or more.

The San Francisco-based company said in a press release that it had seen a “marked increase in users seeking and booking long-term stays.” So now, after already booking 3,000 monthly rentals, Airbnb said it is improving the functionality and expanding the long-term market on the site.

“Searches for reservations of a month or longer will now display the total monthly price directly in search results,” said Airbnb.

The move will add more competitors to Airbnb, including huge sites such as Craigslist, which specialize in longer-term rentals. Until now, the well-funded site — which has just recovered from a recent controversy over a booking gone bad — has focused on shorter, hotel-like offerings, but at people’s homes.

Facing a barrage of negative press about its upcoming IPO, Groupon CEO and co-founder Andrew Mason took up a pen to counter critics of the social buying service.

Especially under scrutiny has been the Chicago-based Groupon’s accounting of its finances — along with worries that its torrid growth is slowing — both of which Mason addressed in detail in a pugnacious email memo to his thousands of employees.

Specifically referencing a recent article speculating that the daily deals site was running out of money, Mason said, in part:

“While we’ve bitten our tongues and allowed insane accusations (like in the article above) to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off.”

Mason also took on the controversial ACSOI — or adjusted consolidated segment operating income — metric that Groupon used in its initial filing and later stepped back from.

“The reason we didn’t realize everyone in the world would hate ACSOI (no, it’s not the same reason we didn’t realize everyone in the world would hate our Superbowl ad), is that we think it actually does a pretty good job at describing our marketing expenses in a steady state — we just didn’t realize there would be so many skeptics,” wrote Mason.

Mason also took some aim at competitors, such as LivingSocial and Yelp, in the email.

As for the public offering, which is expected next month:

“If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.”

Then again, that is exactly what a dad-to-be would say about his baby, whatever it looked like.

Mason, when asked about the memo, declined to comment.

There is a lot more than that, so here’s Mason’s full email for all you pencil pushers to peruse:

Dear Groupon,

This weekend, I did a Google News search on our company — my first in awhile. The first story that popped up was called The Fall of Groupon: Is the Daily Deals Site Running Out of Cash? I laughed when I read the headline (in the car by myself, weirdly). First — with this article, the degree to which we’re getting the shit kicked out of us in the press had finally crossed the threshold from “annoying” to “hilarious.” Second, I was struck by the irony — I had just finished a board meeting last Wednesday saying this to myself: I’ve never been more confident and excited about the future of our business.

I realize that this sounds like the kind of thing that CEOs say when they’re trying to pep people up. First of all — I’m all about not pepping people up. If you don’t believe me, just ask my fiancée, Jenny “why don’t you ever say anything nice about me” Gillespie. Want another example? Look at the magazine covers in our lobby, which are there to make you sad by reminding you of the impermanence of success.

I’m going to spend the rest of this email explaining why I’m so excited. You need some ammo to argue back against your blog-reading “friends” (silently argue in your mind, that is — you can’t actually say any of this yet), and I’ve been told that the “what have you ever done with your life that’s so great?” rebuttal isn’t working as well for you guys as it has for me.

While we’ve bitten our tongues and allowed insane accusations (like in the article above) to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off.

I’ll summarize my excitement with four points: 1) Growth in our core business is strong 2) Our investments in the future — businesses like Getaways & NOW — look great, 3) We are pulling away from competition, and 4) We’ve built a great team that I would pit against anyone. In other words, all the stuff that one would want to look good? It looks good.

Many of the long-term unknowns of our business are becoming known, and we like the answers. I will now elaborate in a level of financial detail that will give Jason Child a stomach ulcer.

1. GROWTH IN THE CORE BUSINESS

Thanks to a tremendous effort by our sales team, August in the U.S. is shaping up to be a pivotal month. It appears that will revenues grow by about 12% over last month (which is a lot), while we cut our marketing expenses by 20% in the same period.

Beyond their obvious goodness, these numbers are important because they answer one of the main criticisms thrown at us in the past few months, relating to a metric we put in the S-1 called ACSOI (adjusted consolidated segment operating income) to help people understand how we think about marketing expenses. The reason everyone in the world seems to hate ACSOI is that it makes us look magically profitable by subtracting a bunch of our customer acquisition marketing costs from our expenses. The reason we didn’t realize everyone in the world would hate ACSOI (no, it’s not the same reason we didn’t realize everyone in the world would hate our Superbowl ad), is that we think it actually does a pretty good job at describing our marketing expenses in a steady state –we just didn’t realize there would be so many skeptics. I think it’s worth going deep on this one more time — brace yourself.

Our internal forecast shows two different types of marketing: what I’ll call “normal marketing” — which is NOT excluded from ACSOI — and “customer acquisition marketing,” which is. The way Groupon spends on marketing is unique in three ways:

1. We are currently spending more than just about any company ever on marketing — in Q2, we spent nearly 20% of our net revenue on marketing, while a typical company spends less than 5%. Why do we spend so much? The simple answer is “because it works.” But thats only part of what makes our situation special.

2. Our marketing — at least the customer acquisition marketing that we remove from ACSOI — is designed to add people to our own long-term marketing channel — our daily email list. Once we have a customer’s email, we can continually market to them at no additional cost. Compare this to Johnson and Johnson, McDonald’s, or most other companies. If I’m a Johnson, and I’m trying to sell you a box of Band Aids, I have to keep spending money on commercials and magazine ads and stuff to remind you about how sweet Band Aids are, even after you’ve bought your first box. With Groupon, we just spend money one time to get you on our email list, and then every day we email you a reminder of the sweetness of our metaphorical Band Aid. There is no cost of reacquisition — that’s unusual (and we created ACSOI to point that out). If Johnson wanted to follow the Groupon strategy, he would have to start a free daily newspaper about bandages and then run Band Aid ads in it every day.

3. Eventually, we’ll ramp down marketing just as fast as we ramped it up, reducing the customer acquisition part of our marketing expenses (the piece that we remove in ACSOI) to nominal levels. We are spending a ton now because we’re acquiring as many subscribers as we can as quickly as we can. We aren’t paying attention to marketing budget (just marketing ROI) in the way a normal company would, because we know that even if we wanted to continue to spend at these levels, we would eventually run out of new subscribers to acquire. So our customer acquisition spend drops severely to reflect the fact that eventually we’ll run out of people we can add to our email list. We view this internally as a very large one-time expense and then our job forever after will be to continually convert these subscribers into customers and to make sure our customers keep buying from us. Ongoing, the normal marketing dollars we spend are not something we would remove from our internal calculation of ACSOI.

I tried my best to explain this simply, but it’s not lost on me that if you actually understood this, you probably had to read it three times. It’s not easy stuff. It’s much easier to assume that we’re goons. So people can be forgiven for being suspicious. In fact, feel a little bad about how downhearted the critics will be when we don’t turn out to be a Ponzi scheme — those are good impulses for journalists to have, and I hope our non-evil ways don’t destroy their spirits.

Anyway, there’s a reason that I just went on about ACSOI. One of the questions that skeptics ask is, “when you ramp down marketing, won’t revenues stop growing as well? Aren’t you just buying growth?” Over the past several months we’ve been consistently reducing our marketing spend and yet revenues are still increasing at a significant pace. In Q1 of this year, marketing represented 32.3% of our net revenues. By the end of Q2 it had fallen to 19.4%. And it has continued to fall over the past several months all because we’ve been investing in our own long-term marketing channel — our email list.

Internationally we see the same trends — marketing is down, but revenues are up — every country is either losing less or making more. Even in young markets like Korea, where we’re still making massive investments, we’re seeing unprecedented growth. We started building our Korean team this January, despite the presence of two competitors that were larger than any we’d previously battled from behind. Thanks to the brilliant execution of the Korean team, we are set to be the market leader within months. We’ve never had a country grow as fast as Korea!

What about our joint-venture with Tencent in China? Did you read the article that Gaopeng’s CEO has kidnapped the first born children of all our employees and is putting them to work building a laser beam he’ll use to slice the moon in half? It turns out that that one isn’t true either. China is definitely a different market, but every month we inch closer to profitability. As has been our strategy in launching other countries — Germany, France, and the UK, included — our China growth strategy was to hire quickly and manage out the bottom performers. So far, that strategy has improved our competitive position in China from #3,000 to #8. Will we one day reach the dominant status we enjoy in most (come on, Switzerland!) other countries? It’s too soon to tell, but there’s no question in my mind that we’re building a business that will be around for the long haul.

2. NEW BUSINESS LINES ARE BOOMING

Travel and Product are enormous opportunities. After only a few months, they’re already making up 20% of revenue in some countries. We sold $2M worth of mattresses in the UK — in one day! Groupon Getaways will do $10M in its first calendar month — which you might think is awesome, but we’re actually disappointed with those results because we know how much better we’ll be doing soon.

While there’s still a ton of work to do, Groupon Now! continues to see weekly double digit growth. The model works and I believe it will play a major part in the future of our global business as more merchants and customers join the marketplace.

3. WE ARE PULLING AWAY FROM COMPETITION

If there’s a question I’ve received from Groupon skeptics more than any other, it’s, “how will you fend off the competition — especially massive companies like Google and Facebook?” I could give a dozen reasons to bet on Groupon, but it’s impossible to predict the future or the actions of others. Well, now the sleeping giants have woken up — and the numbers are showing that what was proven true with literally thousands of other competitors is just as true with the incumbents of the Internet: it’s kind of hard to build a Groupon. And since anyone with an Internet connection can track the performance of our competitors, I can be more specific:

Google Offers is small and not growing. In the three markets where we compete, we are 450% of their size.

Yelp is small and not growing. In the 15 markets where we compete, our daily deals are 500% of their size.

Living Social’s U.S. local business is about 1/3rd our size in revenue (and smaller in GP) and has shrunk relative to us in the last several months. This, in part, appears to be driving them toward short-sighted tactics to buy revenue, like buying gift certificates from national retailers at full price and then paying out of their own pocket to give the appearance of a 50% off deal. Our marketing team has tested this tactic enough to know that it’s generally a bad idea, and not a profitable form of customer acquisition.

Facebook sales are harder to track, but are even less significant at present.

My point is not that our competitors will fail — some may actually develop sustainable businesses, or even grow — after all, local commerce is an enormous market. The real point is that our business is a lot harder to build than people realize and our scale creates competitive advantages that even the largest technology companies are having trouble penetrating. And with the launch of NOW, I suspect our competition will have an even harder time in light of the natural barriers to entry that are needed to build a real-time local deals marketplace.

4. OUR TEAM

This is the fluffiest of the four points, but maybe the most important — we’ve built a global team of hungry entrepreneurial operators and seasoned executives that rivals any team I know of. Almost every day, I find myself in a scenario where I silently think, “I can’t believe I got this person to work for me — that failure of judgement is perhaps their single flaw.”

I point out the team because while today the business is strong and it appears we must endure success for awhile longer (despite its impermanence), we will inevitably be challenged with issues we didn’t predict — and when that happens, the quality of our team will be a deciding factor in our ultimate long-term success.

FINAL THOUGHTS

I wrote this email because when I read some of the press this weekend, I realized a rational person could read this stuff and wrongly conclude that we’re in trouble. The irony is hopefully clear: We’ve never been stronger.

And while we’ve refrained from defending ourselves publicly, you’ve continued to create our best defense, with every department innovating new practices that are taking our business to the next level. Thanks for staying tough, determined, and agile throughout this process. For now we must patiently and silently endure a bit more public criticism as we prepare to birth this IPO baby — a breed for which there are no epidurals. If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.

I’ve been as candid as possible — hope this sheds some light on things. Reply with your questions if anything remains unclear. Amidst all this, I hope you remember what we’re doing here — we are making history together. I guess you don’t get to build something that reshapes the local commerce ecosytem without getting a few bruises. I’m so proud of the work we’re doing, and I feel extraordinarily lucky to work on what I think is the best thing that’s happened to small businesses since the telephone We’ve invented something that is catalyzing millions of dollars of local commerce every single day in 45 countries and fills the lives of millions of customers with unforgettable experiences — it’s pretty remarkable.

Looking forward to getting this behind us!

Andrew

P.S.: I almost forgot to address the nonsense about us running out of money in the article above. If you apply the same logic used in the article, you’d have concluded long ago that companies like Amazon and Wal-Mart were running out of cash too. Both have often had payables far in excess of their cash. Finance geeks call this a working capital deficit. It’s normal, manageable and a lot of folks actually believe it’s good thing and would kill to get paid from their customers long before they have to pay their suppliers. We are generating cash, not losing it — we generated $25M in cash last quarter alone, adding to the $200M we had before. In other words, we’re doing the opposite of running out of money.

Speaking of “it looks good,” here is Conan O’Brien with a Tourette’s version of Mason’s new catchphrase:

Here’s a handy helper for those following the fate of the Hulu premium online video service, whose noisy efforts to sell itself have gotten a lot of attention of late:

“In preliminary talks” = “hawking itself to one of a half dozen big moneybag tech companies who will visit with Hulu’s bankers and management to see its presentation at Morgan Stanley’s office in Century City in Los Angeles.”

Last Friday, for example, that meant a look-see for Microsoft execs, to show the software giant the story of how paying top dollar for the popular Hulu would be a great investment.

This week, sources said, Yahoo will get the expected gander at the books too, among the other companies targeted by Hulu as part of a sales process in its very early stages.

Among those companies on the short list, sources said, along with Microsoft and Yahoo are: Google, Verizon, AT&T and Amazon.

None of these should come as a surprise, since they all have a big interest in the digital distribution of content business.

Google is perhaps the most interesting and difficult of the group, due to both its massive YouTube unit and the even more massive interest by government regulators about its disturbing massiveness.

Amazon is the company that seems most suited as a Hulu buyer, since it already makes its business selling and distributing content. In addition, Hulu CEO Jason Kilar was a former exec — bringing a certain level of familiarity and presumably much less of the grumpy disgruntlement that he experienced with Hulu’s current media giant owners.

Microsoft seems like the longest shot and least enthusiastic, although it certainly could afford it.

As for Yahoo: Good lord, it needs something sexy to tell weary investors.

Not in the initial round, but other possible acquirers Hulu is targeting: Facebook, Netflix, Samsung and Liberty Media.

And definitely not among those kicking the tires: Disney, News Corp. and Comcast, the trio of partners who own Hulu, along with Providence Equity Partners.

The big question, of course, is whether media-focused Apple — a notorious buyer of almost nothing — would be interested in Hulu.

These blind dates with the best possible buyers will presumably give each insight into Hulu’s business and give Hulu information on what they are looking for.

Sources who have heard the pitch said Hulu is positioning itself as an inevitable competitor to cable, which seems an odd position to take, unless it can get regular access to the kind of top-drawer content that consumers want.

And that will be the most important issue for anyone buying Hulu: The time and terms of rights to the television and movie content on the site, which has been a critical part of its success.

Buyers I have interviewed said Hulu has to offer at least an 18-month license for its content and a pile of rights to hit shows to differentiate itself from competitors.

As Peter Kafka wrote, Hulu buyers would indeed get exclusive content, but with strings attached.

He also noted that the latest content licenses for Hulu’s owner/partners — Disney’s ABC and News Corp.’s Fox — have recently been completed, deals that will stay intact if Hulu is sold.

Unlike Netflix, which has had to pay top dollar for a small pile of premium content while deftly using a large archive of older content to attract subscribers, Hulu’s success has had a lot to do with more access to popular current shows offered by its media giant owners.

Those shows include TV hits such as “The Office” and “Glee.”

That access has become a point of contention with those owners, who have differed with Hulu management about what comes next for the mostly advertising-supported site, even though its slick product has been a clear hit with consumers.

Of course, some speculate that Hulu might not sell at all, just as it never went public as it had said it might do previously. In that case, it will be interesting to see what will become of Hulu once the music stops.

(And, if anyone would like to email me the Hulu presentation or notes on it, please do, so I can formulate a bid myself!)

But, until this deal churns slowly, leakily and loudly forward — let’s enjoy some apt Hulu content. As usual, the fun version of ABBA’s “Dancing Queen” by the kids from “Glee” was not available on the site.

Thus, I selected frequent “Glee” guest star Gwyneth Paltrow belting out Joan Jett’s “Do You Wanna Touch Me” on the show, as a good alternate metaphor for the sales process:

In any case, I hope Google+ succeeds. Given the blog posts saying this will kill Tumblr, Twitter, Foursquare, etc, you might wonder why I feel that way. Well first, I don’t think competitors kill companies and services. I think the vast majority of “deaths” are self inflicted.

– A VC Fred Wilson, on the newest entrant into social networking game.

They didn’t, but that does not mean it’s not worth watching his attempt.

In fact, if you want to get a good idea of the shaggy, goofy and unique personality of Groupon, this interview with Mason at the ninth D: All Things Digital earlier this month should provide some insight about the social buying phenom.

How it navigates its upcoming IPO and deals with competitors such as Google going forward are some of the many topics I covered with Mason in the video below:

]]> http://allthingsd.com/20110628/the-death-stare-stylings-of-groupons-andrew-mason-the-full-d9-interview-video/feed/ 0 http://allthingsd.com/20110428/godspeed-on-that-investing-thing-yertle-but-i-still-have-some-questions-for-your-boss-arianna/ http://allthingsd.com/20110428/godspeed-on-that-investing-thing-yertle-but-i-still-have-some-questions-for-your-boss-arianna/#comments Thu, 28 Apr 2011 17:19:11 +0000 Kara Swisher http://kara.allthingsd.com/?p=43217

Would it surprise you to know that BoomTown doesn’t really care anymore if TechCrunch editor Michael Arrington sidelines as a blogger while he makes investments in tech companies his tech news site covers?

In a post yesterday, titled “An Update to My Investment Policy,” Arrington made his seemingly cogent arguments that plenty of disclosure made it all “fine,” took one of his typical look-at-me swipes at anyone who dared to question this logic (apparently, we’re crappy “direct” competitors, so we haters have no standing to comment!) and presumably went on his merry investing way.

While I was first irked–because it was an appalling show to many of us cranky standards-insisting whiners–I soon realized Arrington had made a good argument about who he is and, frankly, who he has always been.

In other words, it’s a kind of there-he-goes-again thing, vaguely icky but hardly surprising and completely genuine.

Meanwhile, his new boss, AOL content head Arianna Huffington, pointed me to his post in an email.

When I asked her for an on-the-record comment, as usual, she politely and quickly complied, writing in support of Arrington:

“TechCrunch is committed to transparency. Michael has written about the guidelines he follows–that he rarely writes about companies in which he is an investor, and that, when he does, he clearly discloses this information. The same rules apply when TechCrunch’s writers cover these companies.”

Hold the phone.

Because while I kind of understand where Arrington is coming from, what I don’t understand is how this kind of convenient and on-the-fly rule-making can govern a much larger company whose strongly and repeatedly stated goal by Huffington herself is to create quality journalism.

Since I believed Huffington–whom I like very much as an Internet figure and as a friend–I was confused at what the rules for the whole of AOL content were now.

That’s why I sent her a long new list of questions to answer, which are:

1) What are, if any, the ethical guidelines about making investments for the editorial staff at HuffPo media group properties?

2) Since Arrington now seems to have permission to do so from you, can other editors at AOL properties do the same–that is, make very adjacent investments to what their site covers, as long as they disclose it? For example, can an editor who runs the entertainment site make investments in entertainment companies she/he has coverage responsibility over? (By the way, did you give him permission to make these investments? Did he ask?)

3) Is there anyone who polices what is fair coverage of competitors–i.e. companies competing with companies your editors invest in?

4) If an editor makes investments in a company and someone who works for them writes about that company, does that editor have to recuse himself from the story? Is that even possible?

5) Since you just fired someone for what you called an ethical breach–asking freelancers to work for free and also seemingly defending an attempt to curry favor with an advertiser/client–why is this not an ethical breach?

I had a lot more questions, still unanswered by Huffington, but you can see where this is going.

Simply put, does AOL, which is touting itself as a 21st-century media company, need to have 21st-century rules of the road? Or perhaps not so much?

UPDATE: Now, it is a real clown circus at AOL, with the company declaring that editorial personnel cannot make investments, except Arrington!

“As a rule, in order to avoid conflicts of interests, AOL Huffington Post Media Group editors, writers, and reporters may not have a financial interest in a company or industry that they regularly cover,” AOL said in a statement to Business Insider today, even though I nicely asked for a comment on the issue yesterday. “Arrington operates from a unique position.”

And how! Where do I get such a faboo ethical hall pass from Content Principal Huffington?

I suppose I should go all slouching-towards-Bethlehem here, and wring my hands over this unusual ruling, but what’s the use?

As you might have read: “The best lack all conviction, while the worst are full of passionate intensity.”

How did this all start, especially since I feel like this ridiculous tempest in a Silicon Valley teapot over Arrington’s investment-making might actually be my fault a little bit?

Here’s why:

On Tuesday night around 10 pm (just when I start getting revved up), I wrote a testy email to Arrington’s bosses at AOL–Huffington and CEO Tim Armstrong–as well as the Internet portal’s sharp PR head, asking for a response about what seemed to me to be a glaring conflict of interest at TechCrunch related to new investment activity by Arrington and the site’s coverage of those particular companies he had invested in.

It was all disclosed, of course, but it still felt, as I said, icky.

And, given the recent and loudly stated goal of promoting quality journalism by Huffington–including the recent dismissal of AOL’s Moviefone site editor over what the company considered ethical lapses–it seemed pertinent to ask.

Mostly because I don’t think they actually knew much–if at all–about Arrington’s increasing investing action. Armstrong said as much in an email to me, and Huffington assured me they were going to check it out tout de suite.

But rather than the answer I was waiting on, up popped Arrington’s missive yesterday, which I assume came after his bosses asked for some info on this.

In it, he explained his controversial decision to go back into investing again, in what is clearly a more significant manner.

It was a practice he had abandoned years earlier, apparently after being pecked by detractors for it.

But, dear readers, no more! Let Arrington be Arrington!

And that seems to be a talented blogger with a flare for the dramatic, with a clearly sharply-honed news nose and sassy writing skills, but a scribe who much prefers to be a playah than just an observer and chronicler of that play.

And, after more reflection, I thought: Well, maybe it is a better idea for Arrington to go play with all the boys in Silicon Valley, which would probably be more fun than taking flack for lack of traditional journalistic ethics he never ascribed to in the first place.

I once jokingly nicknamed Arrington Yertle the Turtle after the Dr. Seuss book on one dubious king of one small pond in Sala-Ma-Sond, after he went particularly nuts on the topic of news-embargo breaking.

That diatribe on how he saw news rules–which is to say, there aren’t any that bind him–was vintage Arrington, too. And, after reading his latest post, I suddenly realized that it’s pointless to give a turtle a hard time for not being a fish.

But Huffington is another story. She has put herself in word and deed right into the center of the debate on where news is going on the Web, especially after AOL paid $315 million for her Huffington Post news and opinion site.

Huffington has certainly taken a lot of hits over the years as the HuffPo has grown, some deserved, but she has clearly led an impressive effort.

In fact, I think the cute-kitten and celebrity-loving angle played up by her detractors to dismiss her is silliness, because she and the Huffington Post are clearly more than that and are obviously having a major impact on the future direction of content in the digital age.

But that power she has sought also gives her a responsibility to say exactly what that means on a real and granular and consistent level, beyond the platitudes of wanting to make great journalism that she declares all the time now.

In other words, very specifically: What does Arianna Huffington stand for in regards to journalism? What are her rules and standards and codes? And, perhaps more importantly, what does she not stand up for?

These are questions I hope Huffington–who is really good at smacking back at criticism, too (See: the New York Times’ Bill Keller)–will address in one of her patented blog-xplosions and many times over, too.

Until then, here’s a link to my very long and very detailed ethics disclosure on All Things Digital, which is exactly how our little site thinks it should be in the digital age.

In short, besides signing the Dow Jones Code of Conduct–standard at The Wall Street Journal and other DJ publications–all our editorial staff is required to also pen their own in-plain-English personal and detailed account of disclosures that are pertinent to their job.

(You can read an extensive interview with me on the subject, in fact, which was posted here by Two Bananas Marketing, this week.)

My ATD disclosure is probably the most detailed of all of them, since I gay-married Megan Smith a dozen years ago. She later became a VP at Google, which I cover from time to time, especially related to other companies I focus on more, such as Yahoo.

Most of the time, if you care to read my posts on Google, I am probably tougher and snarkier than not, mostly because I know the search giant from its earliest days.

And, even though I once wrote extensively for the Journal about Google since its founding and before Megan arrived there, I thought it wise to lay it all out in detailed detail.

(By the way, if you want to try to tweak me by asking what News Corp.-owned Fox News’ ethics rules are, I don’t know, as ATD belongs to Dow Jones, which has had them forever. I will say, though, that Roger Ailes often freaks me out.)

In any case, as Arrington preaches, the more disclosure the better, and perhaps I should say even more so here, given the current swirl, by noting explicitly that I garner exactly no financial benefits from my relationship with Megan.

That might seem odd, because she certainly earns more. But I don’t know how much nor do I ask, since we have separate bank accounts and she always pays up–well, almost always–when half the bills are due. While it sounds painfully un-romantic, we only spend overall what each of us can afford equally in an exact 50-50 split.

In addition, I also legally signed away all rights to inheritance–although I had no such marriage rights in the first place, being gay–of Megan’s assets, which are in a trust for her relatives and our sons (for when they are too old to have any fun).

More to the point, I believe this makes me the only person to marry an exec at a hot Silicon Valley company with no prospect of any gold-digging.

Thus, I clearly would make the worst investor ever–not that I ever invest in tech or plan to while I am a reporter covering the sector.

Thank god, I suppose, that Michael Arrington is there to take up the slack.

]]> http://allthingsd.com/20110428/godspeed-on-that-investing-thing-yertle-but-i-still-have-some-questions-for-your-boss-arianna/feed/ 37 http://allthingsd.com/20110411/winklevii-how-can-we-miss-you-if-you-wont-go-away/ http://allthingsd.com/20110411/winklevii-how-can-we-miss-you-if-you-wont-go-away/#comments Mon, 11 Apr 2011 18:27:01 +0000 Kara Swisher http://kara.allthingsd.com/?p=42509

It seems Cameron and Tyler Winklevoss, the Don Quixote twins of the digital age, have tilted at yet another legal windmill unsuccessfully.

So now, after losing another court challenge to overturn a previous court challenge, they’ll have to settle for $65 million.

Actually, $100 million, which is how much shares in Facebook have appreciated since the pair and also Divya Narendra settled with the social networking giant.

Said the ruling from the U.S. Circuit of Appeals for the Ninth Circuit, in part:

The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace. And the courts might have obliged, had the Winklevosses not settled their dispute and signed a release of all claims against Facebook. With the help of a team of lawyers and a financial advisor, they made a deal that appears quite favorable in light of recent market activity. For whatever reason, they now want to back out. Like the district court, we see no basis for allowing them to do so. At some point, litigation must come to an end. That point has now been reached.

The end? Say it ain’t so! BoomTown, for one, will miss those big lugs.

Not so much Facebook co-founder and CEO Mark Zuckerberg, especially since the pair allege the tech wunderkind stole the idea for the start-up while a student at Harvard University.

After much legal mishegas, they got $20 million and 1.25 million shares at a price of $8.88 each.

And that’s more than enough, said court to the the Winklevii–it’s their eternal nickname in Silicon Valley now–and they can’t back out of a settlement they made in 2004.

As for the specifics, the three-judge panel struck down every Winklevoss argument:

- They said the terms of the Facebook deal introduced after mediation were typical.

- They said Winklevii should have been sophisticated enough to understand valuation.

- They said Winklevii couldn’t use the sealed mediation settlement documents to argue their case.

It’s true, but it’s also sad to see it all over, since all the litigiousness between Zuckerberg and the Olympic rowing brothers has been so dramatic that it was the subject of the almost Oscar-winning movie, “The Social Network.”

But maybe they can go to the Supreme Court! One can dream!

And with their latest loss and all the Google machinating against Facebook, who’s up for a sequel: “Geek Wars: The Empire and the Vii Strike Back.”

In a statement, Colin Stretch, deputy general counsel of Facebook said: “We appreciate the Ninth Circuit’s careful consideration of this case and are pleased the court has ruled in Facebook’s favor.”

Here’s the full ruling:

08-16745

]]> http://allthingsd.com/20110411/winklevii-how-can-we-miss-you-if-you-wont-go-away/feed/ 4 http://allthingsd.com/20110407/former-yahoo-aol-huffpo-sales-dude-greg-coleman-lands-again/ http://allthingsd.com/20110407/former-yahoo-aol-huffpo-sales-dude-greg-coleman-lands-again/#comments Thu, 07 Apr 2011 13:00:27 +0000 Kara Swisher http://kara.allthingsd.com/?p=42436

Greg Coleman, the online advertising sales exec who keeps making bank after bouncing from top Web jobs, has a new one.

The former Yahoo, AOL and Huffington Post sales leader has just taken over as president of Criteo, a “personalized retargeting” company–essentially, it delivers highly targeted ads to consumers.

Coleman said in an interview with BoomTown last night that he will be focused on expanding Criteo’s U.S. business.

“Performance advertising is a huge opportunity in a high-growth arena,” he said. “I couldn’t pass it up.”

While the 300-person company has offices in Silicon Valley and New York, its HQ is in Paris.

So, Coleman (pictured here)–who has grabbed huge sums of exit cash, first when AOL management changed and then when AOL bought the HuffPo–now gets to visit the City of Lights all the time.

Zut alors! As I have previously written, I’ll have what Coleman’s having.

Toby Coppel, an investor in Criteo who is also on its board, worked with Coleman at Yahoo.

Criteo has raised almost $24 million from Coppel and other investors such as Bessemer Venture Partners and Index Ventures.

Its competitors are other start-ups, such as MyThings.

Here’s the official press release on Coleman’s new job:

CRITEO TAPS GREG COLEMAN AS PRESIDENT

Former Huffington Post president and Yahoo! sales chief will take retargeting leader to the “next phase of phenomenal expansion”

PALO ALTO, CA – (April 7, 2011)–Criteo, the global leader in personalized retargeting, today announced that Greg Coleman, former president and chief revenue officer of The Huffington Post and EVP global sales for Yahoo!, will join the company as president. Coleman will oversee global operations and lead the U.S. expansion of the company, whose platform for delivering personally relevant ads to Internet users has enabled the largest e-commerce marketers to post significant incremental sales for the past three years.

“Greg is a visionary who raises the bar,” said JB Rudelle, CEO of Criteo. “With his experience and relationships, we will extend our e-commerce solutions to new clients, deepen our engagement with existing customers, and bring industry appreciation of retargeting to new levels.”

Coleman has caused explosive sales growth for several of the world’s most influential media and technology companies. As the president and chief revenue officer of The Huffington Post, he built a $30 million ad business in one year. As EVP global sales at Yahoo!, he assembled a pre-eminent sales team that grew ad revenues from $600 million to more than $6 billion. As president of U.S. Magazine publishing for Reader’s Digest Association, he turned advertising from an afterthought to more than 25% of corporate profit. Coleman’s experience has translated to the top-ranked class for three years running at the McDonough School of Business at Georgetown University.

“Performance advertising is marketing’s new frontier, and it’s still wide open,” said Coleman. “Technology and sales will determine leadership. Criteo has the premier technology for personalizing the advertising experience. The company originated the worldwide market, is the leader in Europe, and has a secure foothold in the U.S., because the technology is the most reliable and scalable. I’m here to spur the next phase of phenomenal expansion.”

Criteo tripled operations in 2010, grew to 300 employees and served more than 50 billion personalized ads on behalf of more than 1,000 e-commerce companies across 20 countries globally–driving an 11x increase in incremental post-click revenues for clients. Criteo technology enables merchants to win back the consumers who leave their websites before completing purchases, and gives advertisers a single source for complete retargeting campaigns–design, buying, serving, optimization and reporting.

By colleagues’ accounts, Coleman has the assets to increase Criteo’s momentum. Former Huffington Post CEO Eric Hippeau calls him “a true innovator” and says he “created the model for selling social marketing.” And former Yahoo! CEO Terry Semel calls him “the most wired, successful and liked sales executive in Internet marketing.”

“Greg creates unique partnerships with advertisers and merchants,” added investor and Criteo board member Toby Coppel. “He can make Criteo the industry standard.”

]]> http://allthingsd.com/20110407/former-yahoo-aol-huffpo-sales-dude-greg-coleman-lands-again/feed/ 2 http://allthingsd.com/20110324/groupons-andrew-mason-talks-about-no-not-exec-shakeup-but-groupon-now/ http://allthingsd.com/20110324/groupons-andrew-mason-talks-about-no-not-exec-shakeup-but-groupon-now/#comments Thu, 24 Mar 2011 13:04:19 +0000 Kara Swisher http://kara.allthingsd.com/?p=41962

Yesterday, BoomTown had a cheap Chinese lunch and a chit-chat with Groupon CEO Andrew Mason in Silicon Valley–but not about what most people want to talk to him about.

That would be the departure of the Chicago-based social buying site’s President and COO Rob Solomon and who is on the very short list of candidates the hot start-up will replace him with.

Oh, I tried to get him to ‘fess up about all that, but Mason would not bite, except on his Kung Pao Chicken.

Instead, all he wanted to talk about and show off is Groupon’s latest real-time deal innovation, which it is calling Groupon Now–and which Mason has been touting a lot of late.

“It’s deals in a time window linked to a location,” said Mason. “Until now, no one has had the assets to fix a merchant problem that was viciously subject to a chicken-and-egg situation.”

By that metaphor, Mason means real-time deals by location, rather than via emails, doled out and paid for immediately, taking advantage of perishable retail inventory.

And, of course, using the burgeoning smartphone phenom via an app with only two buttons:

“I’m Hungry” and “I’m Bored.”

Which pretty much covers most of humanity’s main complaints.

The company is rolling Groupon Now out to thousands of merchants in early April, first in Chicago, San Francisco and Washington, D.C.

“Even the most popular restaurants and businesses are never completely full,” said Mason. “Groupon Now can help them even out the flow of customers.”

It’s this push and pull that Mason hopes will move “Groupon 1.0″ to the next level.

More importantly, Groupon Now is the start-up’s attempt to thwart rivals hot on its heels, as well as grow into the gazillion-dollar valuations being bandied about for its possible IPO.

But all of those competitors have moved into the real-time space too, from LivingSocial Instant to offerings from OpenTable, SCVNGR to Yelp to Foursquare. And, of course, there are also big efforts coming from both Facebook and Google, whose $6 billion offer Groupon turned down.

Now, no surprise, everyone is second-guessing that decision, putting a lot of pressure on both Groupon and, especially, Mason.

Who–despite all the hype and attention he has received–still has that prenaturally calm Midwestern affect.

“It is more important that we are the ones bringing relevant deals to consumers from our merchants,” he said. “That is all that matters.”

]]> http://allthingsd.com/20110324/groupons-andrew-mason-talks-about-no-not-exec-shakeup-but-groupon-now/feed/ 0 http://allthingsd.com/20110303/dear-andrew-no-comment-mason-how-about-a-comment-on-that-unfortunate-new-beard/ http://allthingsd.com/20110303/dear-andrew-no-comment-mason-how-about-a-comment-on-that-unfortunate-new-beard/#comments Thu, 03 Mar 2011 18:25:20 +0000 Kara Swisher http://kara.allthingsd.com/?p=41248

That Internet sprite, Groupon Co-founder and CEO Andrew Mason, continued in his quest to be the cleverest little entrepreneur on the Web with a very funny post on the Chicago-based start-up’s blog yesterday titled: “No Comment!”

Mason is well known for his hipster-ironic-cute no-comment responses to the media, such as one he gave the New York Times recently:

“Andrew Mason, Groupon’s chief executive, declined an earlier interview request, adding that he would talk ‘only if you want to talk about my other passion, building miniature dollhouses.’”

Buuuuuurn, NYT!

In his latest rumination on life as a digital celebrity, Mason more fully outlined what he would not comment on, including everything even remotely interesting you might want to know about the social buying company, including:

* Plans relating to capital-raising, including a possible public offering

* Pre-announcements of new products

* Our competitors or the competitive landscape

* Statements on core business metrics, including margins or profitability

* Any projections regarding revenue, growth rates or other financial metrics

*Strategic transactions or partnerships with other companies

Thank goodness any metrics we want about how many discounted stripper pole lessons Groupon has sold in Omaha is on-limits!

Mason–who appears to want to become the Midwestern version of comic Jackie Mason, except Jackie would have taken the $6 billion from Google–is now styling a very scruffy Jeremiah-Johnson beard on this blog post, which you can see above.

BoomTown’s query on that: Why, dear God, why?

Here is Mason’s full “No Comment!” post:

No Comment!

As press interest in Groupon has grown, I’ve found myself increasingly uttering two words that have always annoyed me: “no comment.” We like to be as transparent with our customers as possible, but, just as people don’t walk around naked, there are some things that we as a company don’t talk about (for obvious reasons).

The least we can do is be transparent about the things we won’t be transparent about, which are listed below:

* Plans relating to capital-raising, including a possible public offering

* Pre-announcements of new products

* Our competitors or the competitive landscape

* Statements on core business metrics, including margins or profitability

* Any projections regarding revenue, growth rates or other financial metrics

* Strategic transactions or partnerships with other companies

While we’ll clam up when asked about the above business-y stuff, we’ll always be straight forward about things that affect the experience we’re creating for customers and merchants.

]]> http://allthingsd.com/20110303/dear-andrew-no-comment-mason-how-about-a-comment-on-that-unfortunate-new-beard/feed/ 0 http://allthingsd.com/20110301/actually-aols-mark-ellis-is-headed-to-yahoo/ http://allthingsd.com/20110301/actually-aols-mark-ellis-is-headed-to-yahoo/#comments Tue, 01 Mar 2011 23:06:33 +0000 Kara Swisher http://kara.allthingsd.com/?p=41195

As AOL CEO Tim Armstrong works to integrate his $315 million purchase of the Huffington Post into the Internet portal, one of its top advertising leaders is departing for a big job at Yahoo.

Mark Ellis will become head of the Silicon Valley Internet giant’s North American field sales, afterhttp://kara.allthingsd.com/wp-admin/my-sites.php serving in a wide variety of jobs at AOL and being a key lieutenant to global ad sales head Jeff Levick.

Previous to AOL, Ellis worked at sports marketing company IMG, at Quokka Sports, a sports Web site and at Time Inc. as publisher of Time Inc. New Media.

While there, he worked with Yahoo’s current U.S. ad sales head Wayne Powers.

While AOL portrayed the move as a well-planned reorganization in an internal memo, the departure of Ellis was a new wrinkle, as Armstrong has been contemplating how to best rejigger its key ad business after the bold acquisition of the news and opinion site run by its famous editor-in-chief Arianna Huffington.

Several sources said Armstrong found out a week ago about Yahoo’s interest in hiring Ellis, whom Yahoo had been pursing Ellis for far longer. Interestingly, he has been involved in the planning for the changes as the deal to buy the Huffington Post wraps up.

Sources said that deal is expected to close as soon as a week.

Previous to the Huffington Post situation, sources at AOL said the New York-based company has been contemplating a variety of changes, including Ellis’ role, in the ad department as its sales have continued to suffer.

Whatever the circumstances, an experienced ad sales exec like Ellis moving to a major AOL competitor is certainly a change.

Here is Levick’s staff memo on the changes in AOL’s ad unit, with the Ellis move buried low and with no mention of Yahoo (natch!):

Team–

One year ago this week, we decided to innovate the future of brand advertising for the digital world. Last night, our work was recognized by the industry in a meaningful and significant way. The race is on for the next phase of advertising on the Internet and we are in that race. We have more to do, but we’re going to do it and do it quickly.

Today, we also wanted to announce a set of changes that will allow us to expand and accelerate our ability to serve our customers on a deeper level. We now have a great suite of products to match our talented team. We also have an expanding base of consumers on some of the best brands on the Internet and that represents a very attractive proposition for our customers. The addition of The Huffington Post adds an incredibly talented team of sales people and journalists to our team and we have the ability to scale all aspects of our business.

I’m very happy to announce that over the next 90 days, we will be integrating The Huffington Post sellers into our regional teams and expanding the roles of three of our star field generals–Tim Richards, Wendy McGregor, and Tim Castelli. Wendy, Tim, and Tim will lead the sales for AOL and Huffington Post Media Group and report directly to me, moving them into a more central role in AOL’s revenue strategies and management.

Jim Norton will continue to lead the Advance Sales team but will also be taking on a new role as the VP of Product Sales, reporting into me. In this role, he will help realize the potential with Mail, AIM, Local, AOL.com and other core product solutions for National and Advance advertisers, serving as a critical ‘linchpin’ that connects our advertiser opportunities with AOL solutions. Christa Zambardino will continue to lead sales efforts for AOL.com and will report to Jim.

Don Kennedy will also report directly to me, taking our focus on the network to new levels and will continue to build out our Network Sales organization, working in close partnership with Dave Jacobs and Rob Luenberger.

Finally, Mark Ellis will be leaving the organization. I can’t thank Mark enough for all he has done for AOL and for the teams during his time here. He has been a great partner to me and I wish him all the best in his future endeavors.

We will continue to keep you updated on the status of the Huffington Post deal as well as any other organizational announcements. Please feel free to reach out to me with any questions.

Best,

Jeff

]]> http://allthingsd.com/20110301/actually-aols-mark-ellis-is-headed-to-yahoo/feed/ 2 http://allthingsd.com/20110215/hulu-plus-gets-an-art-house-upgrade-with-criterion-collection/ http://allthingsd.com/20110215/hulu-plus-gets-an-art-house-upgrade-with-criterion-collection/#comments Tue, 15 Feb 2011 12:29:00 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=29836 Hulu’s primary appeal is for people who want to watch TV shows on the Web, but the joint video venture does offer a selection of movies, too. Now that selection just got a bit bigger, and more appealing to cinephiles: The Hulu Plus pay service is adding some of the Criterion Collection’s art-house movies to its catalog.

Criterion specializes in classic movies from the canon of great directors–Ingmar Bergman, Jean-Luc Godard, Federico Fellini, etc.–and has about 800 titles digitized so far, many of which are also available via Hulu competitor Netflix. [UPDATE: I'm told that this will be an exclusive deal, and that the Criterion titles that Netflix does offer will expire this year].

Hulu Plus subscribers will initially get access to 150 Criterion films, including “The 400 Blows,” “Rashomon” and “Breathless.” Hulu says the movies will run without ad interruptions, but may feature ads before the films start; the free Hulu.com service will offer a handful of Criterion titles, which will run with ads.

Hulu, owned by Comcast’s NBC, Disney’s ABC and News. Corp.’s Fox (News Corp. also owns this Web site), introduced the Hulu Plus pay service last year. Hulu CEO Jason Kilar says the $7.99-per-month offering is on track to reach one million subscribers in 2011.

]]> http://allthingsd.com/20110215/hulu-plus-gets-an-art-house-upgrade-with-criterion-collection/feed/ 1 http://allthingsd.com/20110209/nokias-stephen-elop-didnt-start-the-fire-but-his-burning-platform-certainly-lights-one/ http://allthingsd.com/20110209/nokias-stephen-elop-didnt-start-the-fire-but-his-burning-platform-certainly-lights-one/#comments Wed, 09 Feb 2011 14:15:21 +0000 Kara Swisher http://kara.allthingsd.com/?p=40539

Memo to tech CEOs everywhere: Now that’s how to write an internal memo.

That would be the 1,300-word one that Nokia CEO Stephen Elop (pictured here) apparently penned for employees at the Finnish telecom giant, which inevitably leaked to the media (in this case, kudos to Engadget for getting the whole thing, which is below).

Elop uses the harsh but cogent metaphor of a burning oil platform to take a bracing opening shot at turning around Nokia, which has lost market share–and, more importantly, mindshare–to both Apple’s iOS and Google’s Android mobile operating system.

This is not breaking news to anyone in the wider tech world, of course. But for the CEO to say it so flatly and brutally to the insular troops at Nokia makes it remarkable.

As you can read, it’s dramatic all right, and just the kind of thing a lot of leaders at troubled companies–Hello, Yahoo!–could learn a thing or two from.

That’s because it’s honest and also genuine, and with enough of a direction and glimpses into pending action–to be revealed later this week at an event to unveil a new strategy–that it’s not just a diatribe by a new manager about how bad the previous managers were.

There is clearly plenty of that, of course, which is no surprise. But with rumors of an imminent significant management overhaul–which few execs ever do enough of at the start of their tenure, when it is easiest–there seems to be teeth to the memo too.

And although the burning platform part will get all the attention, perhaps the most important observation was in one particular passage that outlines exactly the giant challenge Nokia faces to catch up:

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.

Because, as it has turned out, it is all about ecosystems and using them to provide consumers with the best and most seamless experience possible.

Walt Mossberg and I will be interviewing Elop–the former Microsoft exec, who is neither a Nokia insider nor Finnish–about all this and more at the ninth D: All Thing Digital conference in late May.

Obviously, there will be a lot to talk about.

But, until then, here’s Elop’s memo below in its entirety.

I also reposted a video interview I did with Elop in April of 2009 in which he talked about making Microsoft a more open and innovative place, the changing business model of software and more.

Also below is a video Elop ordered up while running Microsoft’s Business Division as part of an “Envisioning” series.

These see-into-the-future videos were done by Microsoft Office Labs as part of a “Productivity Future Vision” series that sketched out a landscape of smartphones, touchscreens everywhere and a whole lot of cool interacting.

It would be nice if he can drag Nokia back into that world–although Elop’s memo is a good start.

Hello there,

There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.

As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.

He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times–his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.

We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.

Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.

I have learned that we are standing on a burning platform.

And, we have more than one explosion–we have multiple points of scorching heat that are fuelling a blazing fire around us.

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.

In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.

And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.

Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally–taking share from us in emerging markets.

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.

The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.

At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.

This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.

On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.

Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.

How did we get to this point? Why did we fall behind when the world around us evolved?

This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.

Nokia, our platform is burning.

We are working on a path forward–a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.

The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.

Stephen.

]]> http://allthingsd.com/20110209/nokias-stephen-elop-didnt-start-the-fire-but-his-burning-platform-certainly-lights-one/feed/ 3 http://allthingsd.com/20110204/rd-spending-nokia-vs-apple-shows-size-doesnt-matter/ http://allthingsd.com/20110204/rd-spending-nokia-vs-apple-shows-size-doesnt-matter/#comments Fri, 04 Feb 2011 16:41:26 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=57209 Some additional perspective on Nokia’s massive mobile R&D spend and a point of comparison for its market return. Extrapolating from Bernstein Research data that estimates Nokia spent $3.9 billion on mobile research and development, Asymco’s Horace Dediu has calculated Apple’s mobile R&D spend, and there’s an astonishingly wide gulf between the two.

Nokia spends about five times as much on mobile R&D as Apple. In fact, Nokia has nearly as many engineers working on its smartphone software platforms as Apple does for its entire product line. Says Dediu, “Symbian alone may cost twice as much to develop than the iPhone (including the hardware).”

A shocking metric, if correct. And a pretty dismal return on investment–unless there’s another version of Symbian in the pipeline that will best iOS.

PREVIOUSLY:

• Not Seeing Much Return on That Massive R&D Spend, Are You, Nokia?
• Nokia: Big and Slow

]]> http://allthingsd.com/20110204/rd-spending-nokia-vs-apple-shows-size-doesnt-matter/feed/ 6 http://allthingsd.com/20110203/not-seeing-much-return-on-that-massive-rd-spend-are-you-nokia/ http://allthingsd.com/20110203/not-seeing-much-return-on-that-massive-rd-spend-are-you-nokia/#comments Thu, 03 Feb 2011 12:10:46 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=57060 Nokia spent scads of cash on research and development last year, but didn’t see much return on it. Certainly, the investment did little to slow the continuing deterioration of its competitive position. The company’s R&D spend for 2010 on mobile was $3.9 billion–almost three times the average of its rivals’, according to a Bernstein Research estimate. And for what? Symbian^3 and the troubled N8? According to Bernstein’s estimate, about a third of Nokia’s R&D spend went to Symbian.

Hamstrung by institutional inefficiencies and the complexity of its legacy platforms, Nokia is spending a lot of money to gain traction in markets in which its handset lineup is clearly uncompetitive, and with little success. Instead it’s suffering steeper share losses at the high end of the market and margin erosion across its entire portfolio. And it’s spending about 4 times as much on R&D as Apple, which has recast the smartphone space from its own vision.

As Bernstein analyst Pierre Ferragu observes, Nokia’s business appears to be melting like an ice cube. “At this stage, we believe that even a good success of Symbian^3 would barely stabilize the business,” he says. “A real comeback will need much more effort … and a lot more time, unlikely to happen in the next couple of years, in our view.”

So what can be done? Though some observers argue Nokia should scrap Symbian, Ferragu says that’s impossible given the number of assets the company has that depend on it. The company can’t really make a big move to Android, either. That would undermine its current service strategy and alienate partners, European carriers looking for an alternative to iOS and Android, and Nokia’s developer community.

What it should do, he says, is redouble its efforts on MeeGo and make it a viable competitor to Android and iOS in markets like North America, while continuing to push Symbian to the rest of the world. And then it should integrate the two through QT, its cross-platform application and UI framework. Says Ferragu, “By migrating all UI developments of Symbian on QT, the company can generate significant cost savings, progressively drive the platform towards a single UI between MeeGo and Symbian and a single development environment for applications.”

What’s left to do after that?

Hope for the best.

As CEO Stephen Elop said during the company’s last earnings call, “Nokia must compete on ecosystem to ecosystem basis. In addition to great device experiences we must build, catalyse or join a competitive ecosystem. And the ecosystem approach we select must be comprehensive and cover a wide range of utilities and services that customers expect today and anticipate in the future.”

“Whatever the strategy is we outline on Feb. 11, we very clearly ensuring that it will give us the opportunity to reopen markets such as the U.S. and some others, where we have not recently been present.”

]]> http://allthingsd.com/20110203/not-seeing-much-return-on-that-massive-rd-spend-are-you-nokia/feed/ 48 http://allthingsd.com/20110201/beyond-the-search-box-the-white-pleather-honeypot-smackdown/ http://allthingsd.com/20110201/beyond-the-search-box-the-white-pleather-honeypot-smackdown/#comments Tue, 01 Feb 2011 19:53:20 +0000 Kara Swisher http://kara.allthingsd.com/?p=40083

Perusing AOL’s leaked damn-the-journalism-full-speed-ahead business plan, BoomTown was a little late to the Microsoft Bing event this morning called “Farsight: Beyond the Search Box.”

But things had certainly been cooking with gas when I walked into the meeting room at the University of San Francisco, which the organizers had decked out in white nubby rugs, white pleather couches and those white egg-shaped chairs found only in 1970s decor.

Schweeet!

First up was well-known investor and entrepreneur Peter Thiel, poo-poohing Microsoft’s prospects of ever making money in search.

“It’s difficult to produce a new search company,” said Thiel, noting that even with a growing market share it’s curtains for Bing, given the huge fixed costs. “As far as I can tell, it’s still not breaking even.”

Ouch!

By the way, Thiel sold semantic search engine Powerset to Microsoft for upward of $100 million in 2008 to help it, you know, get ahead in search.

Way to insult your money-bearing hosts!

Then, moderator Vivek Wadhwa harangued the panelists from Google, Microsoft and Blekko in the session “Who Will Win the Spam Wars?”

And they say I’m a snarky moderator! Wadhwa is snarktastic!

Wadhwa did not like any of it–not crappy content sites that sully Web search, not the efforts the companies were making to fix things, not the vision the trio had of the future.

And, by the way, Microsoft was not ever going to make money off all the company’s efforts.

Way to insult your hosts! I like this event!

Of course, what everyone was interested in was a smackdown between Google and Microsoft, given that the search giant accused the software giant of stealing its results today.

In an excellent, if exhaustive, post by Search Engine Land’s Danny Sullivan, Google said Bing was cheating by lifting its search results, which Google said it had proved via a “honeypot” sting operation.

“I’ve spent my career in pursuit of a good search engine,” Google’s Amit Singhal told Search Engine Land. “I’ve got no problem with a competitor developing an innovative algorithm. But copying is not innovation, in my book.”

The very presence of the word “honeypot” in any story about search algorithms is superb, in my book, even though this “controversy” is pretty much a he-said-he-said geek-off.

Google’s Matt Cutts kept up the cheater pressure at the Bing event, in a short debate with Microsoft’s Harry Shum, who was not having any of it.

“It’s not like we actually copy anything,” he said.

Translation: Actually, we do borrow, just like Facebook’s Mark Zuckerberg did to the Winklevii, resulting in a social networking behemoth that will soon take over all search and make this whole debate moot.

Microsoft is rubber, Google is glue. And Facebook, which was not present at the search event, is the real sticky honeypot.

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