Redmond is facing all sorts of challenges, but its Xbox is a clear success, not only as a gaming console, but as an Internet-connected entertainment device, which gives users access to video services like Netflx and HBO Go, and, increasingly, cable programming from the likes of ESPN. Microsoft says Xbox users now spend more time consuming media than playing games.

Which is why we’re very excited to bring two key Xbox executives onstage next month at D: Dive into Media: Yusuf Mehdi, senior vice president of Microsoft’s Interactive Entertainment Business, and Nancy Tellem, the former CBS executive who is building a new production studio for the device.

Mehdi is the man running marketing, strategy and corporate development for Xbox, and he’s the guy who links the console up with all the studios, networks and publishers who are creating content for the device. Prior to this job, he oversaw Microsoft’s media presence on the Web.

Tellem, a veteran TV executive, is the former CBS president now tasked with creating new programming for the device. She’s building out a Hollywood presence for Steve Ballmer, and her hire last fall was Microsoft’s most aggressive move into the content business so far.

They’re joining a stellar lineup of speakers Feb. 11 and 12 at the Ritz-Carlton in Laguna Niguel, Calif. Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines president David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler, Live Nation CEO Michael Rapino, CollegeHumor co-founder Ricky Van Veen, Vice Media co-founder Shane Smith, Intel media head Erik Huggers and Samsung media head David Eun, Netflix content chief Ted Sarandos (and guest), New Republic owner Chris Hughes, USA Today publisher Larry Kramer, and Dish Network founder Charlie Ergen.

And, yes, we’ll have yet more names to announce in the coming weeks. But if you want to see these folks in person, register now, and we’ll see you soon.

But while lots of pay-TV operators are happy to keep things the way they are, Ergen keeps trying to blow them up: The Dish Network co-founder and chairman is constantly fighting with the rest of the TV Industrial Complex, in disputes that often end up in court.

His most recent and prominent battle is also the most important one: Dish’s new “Auto Hop” technology lets satellite TV subscribers automatically skip commercials, and that has both advertisers and TV networks in fits, for obvious reasons.

But that’s just one of Ergen’s recent adventures. He has also bought Blockbuster out of bankruptcy in an attempt to take on Netflix, engaged in bruising battles with Cablevision and its AMC Networks spinoff, and rattled his saber against ESPN and its ever-increasing sports fees.

Oh. He’s also talking to Google, and everyone else, about getting into the wireless business.

All of which means the former blackjack and poker player is someone everyone in the media world watches very, very closely, even though he doesn’t say much in public. Which means we’re very excited to interview him at our D: Dive Into Media conference in February.

Ergen will be joining an all-star cast on Feb. 11 and 12 at the Ritz-Carlton in Laguna Niguel, Calif. Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines president David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler, Live Nation CEO Michael Rapino, CollegeHumor co-founder Ricky Van Veen, Vice Media co-founder Shane Smith, Intel media head Erik Huggers and Samsung media head David Eun, Netflix content chief Ted Sarandos (and guest), New Republic owner Chris Hughes, and USA Today publisher Larry Kramer.

And there’s more to come! Stay tuned. Meanwhile, we’re getting close to showtime, so make your reservations now.

Ask Chris Hughes and Larry Kramer.

Hughes, one of the original Facebook friends, used a bit of his newfound wealth to buy the storied New Republic earlier this year. A few months after that, Gannett put Kramer, a longtime digital media pro, in charge of its iconic USA Today.

Those are two very disparate publications, but they share a similar challenge: It’s very easy to find the stuff they’re best at — political opinion and general news — for free, all over the Internet. So how do you get readers and advertisers to pay attention, and/or money?

There’s a very good chance Hughes and Kramer won’t solve that one by February, when they appear at our D: Dive into Media conference in Laguna Niguel, California. But we’ll get a very interesting progress report. And since they’ll be onstage at the same time, we should get a very entertaining conversation, too.

Kramer is a former reporter and editor who ended up building and running big Web businesses — most notably MarketWatch, which he sold to CBS in 2005. He then stuck around long enough to help the TV giant embrace digital, via deals like the ones that put March Madness on the Web and CBS TV shows on iTunes. For a smart overview of his challenges at USA Today, see Ken Doctor’s take from earlier this year.

Hughes, quite famously, was one of Mark Zuckerberg’s roommates at Harvard, and became Facebook’s first marketing and PR head. Then he joined Barack Obama’s first presidential run, where he played a key role in the campaign’s pioneering use of social media. Now he’s trying to revamp a 98-year-old magazine that used to play a key role in Washington politics; for more on that see this excellent New York magazine profile.

They’ll join a pretty great cast at the stunning Ritz Carlton in Laguna Niguel, Calif., on February 11 and 12. Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines president David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler, Live Nation CEO Michael Rapino, CollegeHumor co-founder Ricky Van Veen, Vice Media co-founder Shane Smith, Intel media head Erik Huggers and Samsung media head David Eun, Netflix content chief Ted Sarandos and The Person From “Arrested Development” We’d Like to Name But Can’t (Yet).

More to come! In the meantime, head here to find registration information for the conference. See you soon …

Now it’s a bit of everything: Old and not-so-old TV shows, movies you haven’t heard of, movies you have heard of, and starting next year, TV shows that Netflix is making for itself.

The man in charge of all that is Ted Sarandos, who negotiates all of the Silicon Valley company’s deals with Hollywood. So he’s a perfect guy to bring onstage for our upcoming D: Dive Into Media conference, which is all about the confluence of tech and media.

And appearing onstage alongside Sarandos will be … well, we can’t come out and say who, exactly. (Believe us. We’d like to. And we will! But not today. Hollywood is an odd place.)

But we can tell you that it’s someone intimately involved in Arrested Development, the much-loved Fox comedy series that Netflix is reviving next year.

So that should be fun! And informative, too: Sarandos can explain what it’s like to haggle with partners who can’t figure out if they want to cash your checks, or kill you off, or both. And … person to be named later can explain what it’s like to create a big TV show for a digital-only audience. Among other things!

They’ll join a pretty great cast at the stunning Ritz Carlton in Laguna Niguel, Calif., on February 11 and 12. Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines president David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler, Live Nation CEO Michael Rapino, CollegeHumor co-founder Ricky Van Veen, Vice Media co-founder Shane Smith, Intel media head Erik Huggers and Samsung media head David Eun.

More to come! In the meantime, head here to find registration information for the conference. See you soon …

At our D: Dive into Media conference in February, we’ll be talking to people who make amazing content, the people who make a living selling amazing content and the people who help distribute all of that stuff.

But if you want to figure out the future of media, you also have to talk to the people who make the boxes and gadgets you’ll use to consume all of that content.

That’s why we’re very happy to hear at Dive into Media from two heavyweights with important new roles: Intel’s Erik Huggers, corporate vice president at Intel Media, and Samsung’s David Eun, executive vice president for global media.

Intel’s chips have been powering entertainment boxes for a long time. Now the company is reportedly getting ready to plunge directly into the pay-TV business itself by trying to cut deals with cable programmers and rolling out a next-generation set-top box of its own.

Huggers, who used to run the BBC’s digital efforts, is heading up that push, but hasn’t talked about it publicly yet. For now, the company says his efforts are “focused on exploring new ways to access, interact with and share the latest in digital entertainment.” We’ll get a chance to figure out what that really means when he gets on our stage.

And Samsung is already a huge deal in the media world, given its position of power in both the TV and mobile markets. Eun, a tech and media veteran (Google, Time Warner, NBC, AOL), is supposed to leverage that clout to bring software and services to his company’s devices.

Now he’s trying to expand the company’s presence in Silicon Valley, where he’s opening up a new outpost in an effort to build out digital content and services. His Dive appearance will be his first public opportunity to make his case to tech and media hotshots.

Huggers and Eun are joining an all-star lineup in February. Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines president David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler, Live Nation CEO Michael Rapino, CollegeHumor co-founder Ricky Van Veen and Vice Media co-founder Shane Smith.

And we’ve got more great names to announce very soon: Watch this space. In the meantime, head here to find registration information for the conference, which will be held Feb. 11 and 12 at the stunning Ritz-Carlton in Laguna Niguel, California.

The deal was originally agreed to in May 2010, and was partially disclosed when Zynga went public. The terms of the new agreement, which were disclosed in separate filings by Facebook and Zynga, are a lot less onerous for Zynga. It will also free up Facebook to make its own games, if it chooses.

The main points are:

• Zynga will no longer be separately obligated to display Facebook ad units or implement Facebook credits on any Zynga game pages.
• Facebook will no longer be the exclusive social platform for Zynga, allowing it to launch games first on mobile or its own Zynga.com platform (although the games will have to launch shortly after on Facebook).
• Certain provisions related to Web and mobile growth targets and schedules will no longer be applicable, and Facebook will no longer be prohibited from developing its own games. Further, Zynga’s right to cross-promote between games on the Facebook Web site will be governed by Facebook’s standard terms of service.

I’m hearing that the new contract was negotiated between Facebook’s Dan Rose and Zynga’s new Chief Revenue Officer Barry Cottle.

In a statement, Cottle said: “Zynga’s mission is to connect the world through games. In order to do this, Zynga is focused on building enduring relationships with consumers across all platforms from Facebook and Zynga.com on the web to tablets and mobile. Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services.”

After reading the documents, it is clear that the new amendments are a reflection of how much the social gaming landscape has changed over the past two years.

Back when the contract was first signed, Facebook needed Zynga to help transition all developers on the platform over to Credits, which required everyone to give Facebook a 30 percent cut of all revenue. It’s now clear that the more important priority is for both Facebook and Zynga to be successful, which means less restrictive terms.

And while Zynga will be required to make any social game it launches available on Facebook concurrently, or shortly following, another launch, there are some exceptions: Provisions around gambling for real money, games in China and Japan, and mobile games due to technical limitations.

Or you can save yourself a lot of hassle and ask two guys who are already making pretty good progress.

That would be CollegeHumor’s Ricky Van Veen and Vice Media’s Shane Smith. And you can find them both at our Dive into Media conference next year.

To refresh your memory: Dive Into Media is our one-night-plus-one-day tour of the media landscape, and the way technology is changing that world day by day. That means unscripted, unrehearsed conversations with an all-star cast of moguls who hold very different perspectives. They’re all joining us Feb. 11 and 12 at the Ritz-Carlton in Laguna Niguel, just south of Los Angeles.

Here’s who we’ve told you about so far: Sony Entertainment CEO Michael Lynton, Hearst Magazines President David Carey, Google chief business officer Nikesh Arora, Facebook partnership vice president Dan Rose, HBO co-president Eric Kessler and Live Nation CEO Michael Rapino.

And here are two more — both of whom have done very well on the Web and are now trying to figure out how to apply those lessons to more traditional outlets:

Ricky Van Veen co-founded CollegeHumor in 1999, when he and his buddies were actually in college. Seven years later, the site had evolved from a frat-tastic side project into an ambitious, successful content creation machine, and Barry Diller bought it for his IAC conglomerate. Now Van Veen is still working for Diller, but he’s moved from the Web to older media: He’s making TV shows like “Chopped” via IAC’s Notional production company, and next year he’ll release “Coffee Town,” a full-length feature film.

Shane Smith and his Vice Media co-founders started out publishing a raucous, no-holds-barred magazine back in the ’90s, and fumbled their way into the Internet during the first Web boom. Now they seem to have it figured out: They’re on track to generate $200 million this year, while making eye-popping videos — here’s a tour guide for Kabul — backed by blue-chip advertisers like Intel. Next up: An HBO series, and lots of attention from guys who run really big media empires.

Just like our flagship D: All Things Digital conference, D: Dive into Media will give you rare access to deep, smart talks with the people who matter. And we’ll be announcing more of them in the weeks to come. For now, you can find registration information here.

Last month, we announced our second Dive Into Media conference, and you guys told us you liked what you heard. Thanks! Here’s Act Two: We’ll have top executives from HBO and Live Nation joining us in February.

A reminder: Dive Into Media is our one-night-plus-one-day look at the way the media business is grappling with the challenges, and opportunities, that the whirling world of technology presents. That means thoughtful but lively conversations with a stellar cast of movers and shakers, and a chance to learn about new players, as well.

So far, we’ve announced that Sony Entertainment CEO Michael Lynton, Hearst Magazines President David Carey, Google chief business officer Nikesh Arora and Facebook partnership vice president Dan Rose will be joining us on Feb. 11 and 12 at the Ritz-Carlton in Laguna Niguel, just south of Los Angeles.

And here come two more moguls:

Eric Kessler is HBO’s co-president, and by the time you see him onstage, he’ll be the pay channel’s COO. He’s the guy who has mapped out HBO’s distribution and marketing strategy since 2007, which means he’s the guy behind the company’s much-praised HBO Go service/app. That also means he’s the guy to complain to when you insist that you want to watch “Game of Thrones” on your iPad without subscribing to cable. Kessler can explain why HBO says it has no interest in doing that — for now — even as it experiments with digital distribution outside the U.S.

Michael Rapino is the CEO of Live Nation Entertainment, the world’s most powerful events and ticketing company. Live Nation does more than $5 billion a year in revenue — if you sat in a concert hall, stadium or club in the last year, you probably contributed to his take. Even as digital has decimated other industries, live sports and music remain remarkably strong, which is why Rapino has lots of upstarts at his heels. He’s also trying to turn a company with famously creaky technology into a much more nimble player.

Just like our flagship D: All Things Digital conference, D: Dive into Media will give you rare access to deep, smart talks with the people who matter. And we’ll be announcing more of them in the weeks to come. For now, you can find registration information here.

Want to hear more? We’re happy to oblige: We’ll be hosting our second edition of the event next February.

Like our first event, we’ll use the Dive conference to highlight a story we cover at AllThingsD every day — the way the media business responds to technology’s threats and opportunities — by letting you meet some of the industry’s most powerful and fascinating leaders.

You’ll also learn about new players that will have a big impact in the months and years to come. And like every All Things Digital event, you’ll get all of this via our trademark interviews: Unscripted, uncensored and thought-provoking.

The setting is awfully compelling, too: We’re coming back to the excellent Ritz-Carlton in Laguna Niguel, perched above the Pacific, about an hour south of Los Angeles. It’s a great way to spend a night and a day.

We’ll be announcing speakers throughout the fall, but here’s a sampling of what we’ve got planned:

Michael Lynton is CEO of Sony Entertainment Inc., a new post which gives him control of Sony’s movie studio, its music label and its powerful Sony/ATV music publishing joint venture. Each of those businesses faces very different prospects, and we’ll talk about all of them, in one of Lynton’s first appearances since taking the job last spring.

David Carey became president of Hearst Magazines in 2010, and since then he has pushed the publisher aggressively into digital apps and editions for iPads, Kindles and other platforms. But he’s also insistent on keeping the magazine industry’s core bundle of content plus ads intact, and he’ll explain why.

Nikesh Arora is senior vice president and chief business officer at Google, which means he’s in charge of all revenue at Google (2011 total: $38 billion), which means he may be the most powerful person in the advertising industry. We’ll have lots of questions for him.

Dan Rose is vice president of partnerships at Facebook, a big job that makes him the man to see for every media company trying to figure out how to work with the social network and its 955 million users. We’ll ask him what publishers, movie studios, TV networks and music labels are asking for, and what Facebook can deliver.

On behalf of Walt Mossberg, Kara Swisher and the rest of the AllThingsD staff, I’d like to invite you to join us Feb. 11 and 12.

Executives at Yahoo and Facebook have completed an extensive strategic deal, as part of a final settlement of their contentious patent infringement lawsuit and countersuit.

According to sources close to the situation, the agreement will include a major expansion of their ongoing partnership, including a joint advertising sales effort, as well as cross-licensing of some key patents between the pair.

The deal has gotten approval from the companies’ boards — in fact, Yahoo’s directors agreed to it this morning in a telephonic meeting. It will be announced sometime later today.

No actual cash payment will change hands under terms of the deal over the patents, in contrast to the $550 million that Facebook paid Microsoft recently in another transaction related to AOL patents.

But sources said Facebook and Yahoo hope there will be significant upside in several possible advertising and other business deals between the pair that could yield large revenues if executed well.

In addition, there is a possibility that Facebook could later pay to license other Yahoo patents not included in this deal.

Discussions to settle the lawsuits — negotiated by Yahoo interim CEO Ross Levinsohn and Facebook COO Sheryl Sandberg, among others — began almost as soon as Yahoo’s board ousted former CEO Scott Thompson, which I reported on in early June and Yahoo officially confirmed several weeks later in a regulatory filing.

The lawsuit was initially waged by Thompson, who reportedly promised directors that a big financial payoff of many billions of dollars could result from the patent lawsuits against Facebook.

At the time, despite strong support by its legal execs, many other Yahoo managers — including those who had crafted an earlier and successful content- and data-sharing agreement with Facebook — were blindsided by the aggressive move by Thompson. That included Levinsohn — who was then in charge of its global media unit — and other top execs.

So, after Thompson was gone and with board support, Levinsohn immediately reached out to Sandberg. In addition, Yahoo’s point person on the deal, VP of strategy James Heckman, met with a number of top Facebook execs including: Dan Rose, VP of business development and monetization; VP of global marketing solutions Carolyn Everson; and business development director Chris Daniels.

Such an outreach was a major shift for Yahoo, but was possible due to a newly configured board in the wake of the Thompson departure.

Still, some directors who had pushed for the initial lawsuit that Yahoo unexpectedly lobbed against the social networking powerhouse in March have remained on the board and agreed to the latest settlement.

The reason for the change of heart? While many still felt Yahoo had a strong case, backed by important intellectual property in a range of key digital arenas, Facebook was prepping for a long and expensive battle by girding its patent defenses.

Thus, the possible end of the rancorous legal battle should be greeted with enthusiasm by Wall Street investors, as well as many detractors of Yahoo’s legal action across the tech landscape.

And, indeed, the company’s reputation definitely suffered as a result of the lawsuit, with many techies, both inside and outside the company, decrying Yahoo’s lawsuit.

Many of those engineers, as well as entrepreneurs — key constituencies for Yahoo’s revival — firmly believe a patent portfolio should only be used defensively.

Now, if the deal is approved, the move will have been turned a decidedly negative situation into a potentially stronger partnership.

Among the most notable parts of the deal is an arrangement to jointly sell big events and other packages to advertisers.

In addition, as it has in content, Facebook will allow Yahoo to be the first partner to feature information about its users’ “Likes” in actual display advertising on Yahoo.

Extending and adding to such contact-sharing was apparently one bone of contention in the talks to settle the lawsuits, although there had already been an element of that in a previous partnership between the pair. Yahoo is one of the few Facebook partners with access to information from its social graph; Facebook, in turn, gets user contact data from Yahoo.

Of course, how well the pair works together to deliver better experiences for its consumers and marketing for its advertisers remains to be seen.

But it’s clear that any rocky road in cooperation is much better than the legal quagmire both had been stuck in.

One thing is likely — the successful end to the tensions ups Levinsohn’s chances of getting the permanent CEO job. Directors have not given him the nod as yet, with another candidate — Hulu CEO Jason Kilar — as Levinsohn’s leading rival for the job, as I first reported yesterday.

Top execs at Yahoo and Facebook have been hammering out the outlines of a deal over the last several days to end their contentious patent infringement litigation, according to multiple sources close to the situation.

While that could change, sources said a settlement could happen in the coming weeks and that the advanced negotiations will put aside the lawsuits and counterclaims between the one-time close partners and return them back to what could be an even closer relationship.

The key terms being discussed, said sources, include a massive cross-licensing of patents between the Internet giant and the social networking kingpin and an even deeper integration of Facebook into Yahoo and vice versa, which has been a key element of improved engagement of late on Yahoo.

One possible glitch: While Facebook has indicated a willingness to perhaps buy some of Yahoo’s valuable patents, sources said the company is not likely to fork over a massive cash payment to Yahoo as part of a deal.

In a slap to Yahoo’s lawsuit, Facebook recently paid Microsoft $550 million to both buy and also license key patents that the software giant had acquired from AOL, and sources said it is unlikely to do the same for Yahoo.

“Facebook paid a lot of money for patents already, just not to Yahoo,” said one person close to the situation.

That could be a tough reality to swallow for Yahoo, especially since its lawsuit was predicated on the notion that it could get a huge payoff from Facebook in any settlement.

That was the argument used by former CEO Scott Thompson, under whose leadership the legal action was first filed, to convince Yahoo’s board to move forward. The lawsuit caused much consternation in Silicon Valley, but Yahoo’s directors had been told that success could mean many billions of dollars from Facebook to end the fight.

But Thompson was recently ousted from his job over a resume-padding controversy, and it appears that Yahoo board members who pushed for the lawsuit are now distancing themselves from its filing.

In other words, it was all Scott’s fault, so now that he’s gone: Bygones!

Let’s be clear: It wasn’t his doing alone by any means, but Yahoo is now facing an uphill and long-term battle in the case to win anything at all.

That’s why its new interim CEO, Ross Levinsohn, along with several board members, including Third Point’s Daniel Loeb, have stepped up talks.

(Yahoo’s on a bit of a goodwill mission, recently adding activist shareholder Loeb as a Yahoo director after settling its proxy fight with him, as well as finally completing a complex asset sale deal with China’s Alibaba Group.)

Interestingly, for Yahoo’s side, this negotiation now appears to be more of a group effort — with board members actively involved — than a solo performance by Levinsohn as the company presses for a solution now.

Facebook is also very motivated to get rid of the problem, especially because its recent borked IPO has taken up a lion’s share of the media and investor perception and attention. Sources said execs there hope that a successful settlement with Yahoo — as well as an expected announcement of an integration with Apple’s iOS at the Worldwide Developers Conference in mid-June — will return the focus to forward momentum by Facebook.

To underscore the importance of settlement, the discussions are being led by the social networking site’s powerful COO, Sheryl Sandberg, along with its VP of partnerships, Dan Rose.

Sandberg and Levinsohn (and his posse of hey-can-I-help-too Yahoo directors) talked in depth about the settlement at the recent 10th D: All Things Digital conference earlier this week, after a number of previous discussions had already taken place.

One of the core things that people do on their screens in the car is GPS navigation and the ability to see which of your friends are nearby is something we think will be really interesting for people.

– Facebook Vice President of Partnerships and Platform Marketing Dan Rose, referring to the Mercedes version of Facebook

Facebook will later today announce it is adding support for 32 additional currencies to Credits, including the Brazilian real, the Korean won, the Malaysian ringgit and the Russian ruble. That brings Facebook to 47 currencies supported.

Partnerships and platform marketing VP Dan Rose said he expects that nearly all games will make today’s deadline — though my colleague Tricia Duryee has found a couple of developers who procrastinated until the last minute.

Games that don’t make the transition to Credits will soon be warned that they’re violating the newly updated terms of service and face standard enforcement procedures, Rose said. Meanwhile, Facebook has put out all sorts of incentives and case studies showing that usage of Credits encourages more in-game spending.

But Rose continued to downplay any larger ambitions for Facebook Credits beyond creating a more consistent experience for users to purchase virtual goods within games — even though they’re already being used to buy Facebook Deals and a limited selection of movies.

“Our core business is ads,” Rose said. “We think of credits as a service to users and developers. It secondarily generates revenue for Facebook.”

Rose added that Facebook has far fewer credit cards on file than other companies, though he wouldn’t do the math for me. I mentioned that Apple recently announced it has 225 million credit cards on file.

Rose declined to give an equivalent credit card stat for Facebook, but noted that Facebook has said more than 200 million people play games per month, and of those only a sliver — the industry statistic is probably around five percent — ever spend money.

However, that virtual goods spending in real terms is “significant,” Rose said. “Even though it’s a small percentage of people, it’s a large number.”

OK, but now that people are spending more of their money online, I asked, don’t you see the opportunity to facilitate that at Facebook scale?

“From our perspective, the e-commerce and physical goods space is quite well served,” Rose said. “There’s lots of companies doing that and it’s actually quite hard.”

What about deals?

That’s just a matter of convenience, said Facebook platform marketing manager Deborah Liu. “If a user went to the trouble of buying Credits in a game, we didn’t want to say to them you can’t spend that money you’ve already spent with us.”

Are you guys seriously trying to say that you don’t have a larger vision here?

“Really, there isn’t,” Rose replied. “We’re focused on games, and we’ve enabled some other tests. Obviously there are lots of places this could go, but we think we have a lot of opportunity in front of us.”

Liu and Rose added that Credits has mostly avoided problems like fraud and instability because the its economy doesn’t fluctuate, due to help from larger efforts like Facebook’s “social authentication” system, and because users can’t extract their money from the system.

Liu said the demographics of Credits users are parallel with those of social games — older women in regions where Facebook is most popular.

Asked about extending Credits to be more like real currency so they can be passed between people, cashed out from the system and used on other platforms like iOS, Rose said obtaining the banking credentials to allow such functionality and striking deals with other platforms’ payments systems is “not something we’re focused on.” (Though the paper trail may indicate that some credentialing is going on behind the scenes.)

All this denying of Facebook’s larger ambitions for Credits is likely to have no effect whatsoever on industrywide anticipation of such moves. But at this point in time, on the occasion of this mandatory Credits milestone, that’s the party line.

Please see the disclosure about Facebook in my ethics statement.

Mark Zuckerberg’s company is working hard to win over heavyweight content distributors, hoping to convince them to link their sites up with Facebook, or to make their existing links deeper. The pitch: Connect your site to ours, and we’ll drive you eyeballs and help you hang on to them. And in return, we’d like to know more about your users.

Facebook has been headed in this direction for a while, and made a big move in April when it rolled out its “Like” button to outside sites. Some two million of them have now integrated the social network in some form.

But Facebook has made a point of wooing big media companies in the past few months. It has hired New York-based ambassadors specifically for the task, and is sending top executives out east for schmoozes. It might be working.

For instance: Facebook and Time Warner are now talking about using the social network’s login system to “authenticate” cable subscribers who want to watch online video from cable channels like TBS and HBO. Sources familiar with the companies’ plans say they are in early stages, but that the two companies are hoping to link up first with Verizon’s FiOS TV  service.

The upside for Time Warner and Verizon: It will be easy for customers to sign into Web video sites, and easy for them to tell their Facebook friends what they’re doing. That can drive more traffic and engagement, and ultimately more ad dollars or more subscribers.

And the upside for Facebook: It gets incredibly valuable data.

If that linkup goes through, it will be a big deal for pay TV operators, who have been wary about letting outsiders act as gatekeepers between their subscribers and their content. That’s why Facebook and Time Warner want to work with Verizon, a newcomer to the TV business, instead of established cable giants like Comcast.

The proposed Time Warner-Facebook linkup is a good example of what Facebook is trying to accomplish across the board. It wants to insert itself between media companies and their consumers–with “Share” buttons, “Like” buttons and Facebook Connect logins–but in a way that makes both groups happy about the arrangement.

Facebook COO Sheryl Sandberg and Dan Rose, the company’s VP of partnerships, made a version of that pitch to senior Time Warner executives in a meeting last week. The pair also hosted a presentation and dinner for about 20 other big Web publishers, including executives from ESPN, the New York Times, Condé Nast, CBS and at least one media celebrity. “Tina Brown was actually there, which I thought was sort of hilarious,” says one attendee.

Facebook has also hired two New York-based executives tasked specifically with getting big media companies on board: Andy Mitchell, previously a VP of business development at the Daily Beast, and Nick Grudin, who held the same title at Newsweek.

Executives who’ve attended the meetings say media companies seem reasonably receptive to Facebook’s approach. In part, it seems, it’s because the company isn’t Apple or Google, two heavyweights that can make Web publishers wary.

“Facebook doesn’t attest to be perfect about being perfectly transparent about where they’re going. But they’re pretty predictable,” says one meeting participant. “It’s not like Apple, where they’re closed.”

Add another: “It was very friendly. It wasn’t like meetings we’ve had with Google, where everyone’s arms are crossed.”

But publishers are also realistic–they realize by trading user data for traffic and engagement, they’re helping to build up a company that is already competing with them for ad dollars. “In the end, they’re like the other big guys,” says another attendee. “They’re both friend and foe simultaneously.”

Presenting at the webinar will be Myspace CEO Mike Jones–-who has been pitching Myspace as “a social entertainment destination” rather than a social network–-and Dan Rose, VP of Partnerships and Platform Marketing for Facebook.

Here are my live notes:

Mike Jones says the launch today is called “Mashup with Facebook.” Users can share a stream of entertainment content with one-click setup.

One million users engaged so far with Myspace Facebook through initial partnership of “Sync with Facebook,” which was launched in August to push user streams on Myspace to Facebook. Adding Facebook Like button soon.

Image to the right is Myspace’s special branding of its integration with Facebook Connect: “Mashup.”

Dan Rose: Every day 10,000 Web sites integrate with Facebook Connect, but this one is special. Adding users into the experience works when it’s naturally social in the offline world, and entertainment is social.

Rose says Facebook users will be able to take their Likes to Facebook as well.

Jones says this feature will be rolling out to the full Myspace audience today.

Rose says, “There’s nothing different about this implementation than any other Facebook Connect implementation or any other implementation of the Facebook Like button across the Web.”

Jones says, “We think this is a complementary offering to Facebook and other social platforms.”

Rose says it’s good that Myspace is focused on entertainment and Facebook is focused on being a social platform, and those things are different.

In the last couple of days (since the Facebook Connect option was rolled out on the Myspace signup page), metrics for people connecting with Facebook look good, says Jones, but he doesn’t specify. (He keeps saying things are good questions, and then not really answering them.)

There is no financial component to the relationship.

And that’s it! Pretty mellow.

Please see the disclosure about Facebook in my ethics statement.

Facebook VP Dan Rose

Presenting at the webinar will be Myspace CEO Mike Jones–who has been pitching Myspace as “a social entertainment destination” rather than a social network–and Dan Rose, VP of Partnerships and Platform Marketing for Facebook.

Myspace adding Facebook Connect has been rumored for so long you’d think it had already happened, so hopefully there will be more to the deal than that.

If things go as heralded, this will be the first Facebook announcement in a long time where CEO Mark Zuckerberg has not spoken for the company. Dan Rose is a former Amazon guy who joined Facebook in 2006. He has recently spoken on Facebook’s behalf about a partnership with Microsoft’s Bing to give it social data to improve search, and EA’s five-year exclusive Facebook Credits deal. Rose was previously Facebook’s VP of business development and monetization, and according to Kara Swisher was the main negotiator in Facebook’s failed effort to buy Twitter a couple of years ago.

Please see the disclosure about Facebook in my ethics statement.

BoomTown motored on down to the Microsoft campus in Silicon Valley on a fabulously sunny day to liveblog the latest Bing event.

The software giant is updating its search service, announcing deep integration–part of a deal announced last year–with Facebook.

The theme, according to Microsoft (MSFT) SVP Yusuf Mehdi, quoting the Beatles, was search with “a little help from your friends.”

Let’s hope it’s not: “Help, I need somebody.”

11:35 am PT: Mehdi kicks off the show, announcing the line-up, which includes Facebook CEO and co-founder Mark Zuckerberg.

Well, it just got 100 percent more interesting here in this nondescript auditorium.

Mehdi talks a little bit about the future of search and making it better. He talks about social being an important part of it.

While I’d have gone with Barry Manilow, he quotes the Beatles.

Mehdi is followed by Microsoft Online Services Division President Qi Lu, who throws more love bombs at Facebook.

“With the partnershop of Facebook and Bing, we will be able to unlock…how people in a social relationship can be first-class citizens in a search experience,” said Lu.

It sounds so lofty, even though it is mostly trading movie review recommendations or good places to take the kids on a rainy Sunday.

Lu thanks Zuckerberg effusively and invites him onstage.

11:54 am: No hoodie.

Zuckerberg is also “honored to be here,” giving us a little history lesson about the origins of the social networking giant and its various and sundry efforts.

I’ll be honest, the lack of donuts is making me distracted.

He’s not actually saying more than bromides about “what would social search look like.”

And looking around at who would be the right partner in the arena. Microsoft! Of course! That giant investment way back when was nice too!

“They’re really the underdog here,” said Zuckerberg in the first interesting comment, noting that overdogs–that would be Google (GOOG), which he does not mention by name–never innovate much.

His take: Underdogs are the best.

12:01 pm: Mehdi is back to show off the wares in a demo.

First, what’s there. Web search in Facebook and Facebook status updates on Bing.

Zzzzzzzz. Get to the good stuff!

First, a module that brings in a Like module from Facebook into the search, with all the other information provided by Bing.

It is, said, Mehdi, particular for a person.

“This is going to profoundly change how we search,” he said of personalized experiences.

Mehdi also shows off a way to differentiate your friends who have names of famous people, who are the ones who come up on search first.

Interesting, but people search is not the biggest problem I have.

He also says more is coming, such as friend experts surfacing in search and Like in every result on a page that it was possible. Yipes!

Also, thank the Lord, the ability to turn it off.

12:15 pm: Now Facebook exec Dan Rose comes up and starts talking about the Facebook-Microsoft bromance.

Apparently, four years is an eternity in Silicon Valley in terms of a relationship.

Actually, four weeks is long, so congrats you two crazy kids!

I’d celebrate with a donut if they were here.

“More and more” social in Bing, said Rose.

It’s a match made in digital heaven!

12:22 pm: Q&A time!

So what more? The press is so unsatisfied! Yes, we are.

Zuckerberg takes the lead. New interfaces! More!

A privacy question. “This is Instant Personalization,” said Zuckerberg, who said that Facebook has five partners in that effort.

He explains Instant Personalization, saying he wants to clear up misconceptions.

It’s private enough, you oversharers!

“Just because it is all public information about you, this is really good,” he said.

But is it by default? Of course, it is. That’s Facebook modus operandi!

Opt-out should be tattooed on employees at Facebook as a requirement.

Bing does put up a warning at the top of the page, but only five times. Then, you need to go foraging to turn it off.

Next: Does Bing search queries get sent back to Facebook? Not necessarily.

But, “everything is going to be social eventually,” said Zuckerberg, as long as it is public.

Public is apparently the new black.

More questions about new Facebook Groups and other deets, none of which is that bracing.

Apropos of nothing, I am considering asking a question about the ever-exciting Hewlett-Packard (HPQ) scandal, just to jack up the volume.

I try to ask a question about Zuckerberg’s underdog comment, but no more time.

But Zuckerberg sort of addresses it, going on about why he has picked Microsoft as the favorite.

While he does not say it, it’s because Facebook is the overdog here and, as you know, every overdog needs an underdog.

Speaking of cartoon heroes, here is the opening of that classic television show:

Here’s the video of Web 2.0 Summit host John Battelle interviewing Facebook CEO Mark Zuckerberg a few weeks ago, in which Battelle floated a rumor that the social-networking site might be interested in buying Twitter.

If you want to see the exchange, it starts at 22:15 minutes, when Battelle asks: “Is Twitter just a feature of Facebook?”

Awkwardness ensues from there until 23:07 minutes, with no direct question about an actual acquisition effort asked.

Thus, Zuckerberg does not have to fib in front of the Web 2.0 crowd about talks that were just then winding down between Twitter and Facebook, which offered $500 million in its stock to buy the popular microblogging site.

Actually, sources said, while Zuckerberg and Twitter Co-Founder and CEO Evan Williams did meet and get along well, the deal was primarily negotiated by Spark Capital partner Bijan Sabet (Spark is a Twitter investor) and Facebook deal guy Dan Rose.

But, in the end, as BoomTown reported earlier today in a detailed report on the failed deal, Twitter rejected that bid.

As is usually the case, the deal broke down over price–was $500 million worth of Facebook stock actually worth $500 million?–and the typical concerns about integration and costs. Also, Twitter wanted an all-cash deal.

But, more important was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

In fact, Twitter’s fast growth in the “status update” arena has been a frustration to Facebook, some sources said, although Zuckerberg goes out of his way to compliment Twitter in the video below:

[Updated with new details about deal, including who worked on it and info on a cash component.]

About three weeks ago, Facebook and Twitter ended several weeks of serious talks, in which Facebook was offering to acquire Twitter for $500 million of its stock, which also included a cash component.

While rumors of Facebook’s interest were brought up in an interview with Facebook CEO Mark Zuckerberg at the Web 2.0 Summit a few weeks ago, some shot down the idea as silly.

Quite incorrectly, as it turns out, since top execs at both Facebook and Twitter were right then at the tail end of discussions, which were initiated by the privately held Facebook in mid-October, about bringing the two together.

Those talks, sources on both sides said, are now over.

So why did the deal break down?

Well, as is usually the case, over price–was $500 million worth of Facebook stock actually worth $500 million?–and the typical concerns about integration and costs.

But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

“It’s more about timing,” said one person familiar with Twitter’s motivations. “There is a strong feeling that there is still an opportunity–even with the economic downturn–to blow this thing out.”

Still, combining the world’s fastest-growing social-networking site with what is quickly becoming the best-known microblogging service is actually a natural fit.

That’s especially true given that Facebook–for all its powerful online social connections–has seen Twitter race past it in innovating in the “status update” arena.

While some sources at Facebook said Zuckerberg was becoming frustrated by the buzz Twitter was getting–a market that should have been dominated by Facebook–others at the company said he was interested in buying Twitter because of his respect for its progress.

Indeed, at the Web 2.0 interview, Zuckerberg called Twitter an “elegant model” and said that he was “really impressed by what they’ve done.”

Indeed, with about six million registrations, as reported in October, up 600 percent over the last year, the San Francisco-based Twitter–launched in 2006–has had impressive growth.

(It has also been plagued by technical issues, which are–to be fair–decreasing.)

In any case, for those not familiar with it, the premise of Twitter is dead simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

It’s quite a clever idea, although–so far–not a money-making one.

To try to goose that, Twitter’s board replaced the engineer who created Twitter, Jack Dorsey, with another founder, Evan Williams, who had served as its chairman and chief product officer.

The more experienced Williams (pictured here) had already built one company–Pyra Labs, which created the Blogger blogging service–that he sold to Google in 2003. He also started the audio and video search site Odeo, where Twitter was actually born.

Still, its investors have not come down on Twitter to hold back its growth efforts, and have handed over $20 million to the start-up so far. In its last round, Twitter was valued at $98 million.

Its funders include: Union Square Ventures, Charles River Ventures, Digital Garage, Spark Capital and Bezos Expeditions, backed by Amazon Founder and CEO Jeff Bezos.

In addition, well-known Silicon Valley figures, such as Marc Andreessen and Ron Conway, have also invested. Interestingly, Andreessen is also on Facebook’s board.

Other private investors include FeedBurner Co-Founder (and now Googler) Dick Costolo, former Epinions Co-Founder Naval Ravikant and former Googler Chris Sacca.

Twitter needs all the investors it can get, since it has no revenue, although it has been exploring things like charging business customers and adding advertising into the consumer service.

Lack of revenues was an issue for Facebook, said sources, especially related to fees Twitter pays for delivery of its messages to cellphones.

While the issue has been manageable in the U.S., Twitter cut off its SMS support in some international markets this summer because of too-high costs.

But, if Twitter was offered to Facebook’s 120 million users, Facebook execs estimated that it might have to deal with huge SMS fees–up to $75 million annually.

“Facebook has its own revenue-generating challenges,” said one person close to the company. “As much as Twitter would give them a lift in the status area, it was still a worry.”

Not enough, said several sources, to stop Facebook from making another approach at some point in the future. “We’d hate to see Twitter go to another company,” said one source.

Indeed, while all are even more price-conscious than Facebook, large companies that could also be interested include: Google (GOOG), Yahoo (YHOO), Microsoft (MSFT) or a large telecom company, such as Verizon (VZ).

If it had completed the deal to buy Twitter, it would have been Facebook’s most significant acquisition by far.

Zuckerberg and Williams did meet and get along well, but the deal was primarily negotiated by Spark Capital partner Bijan Sabet (Spark is a Twitter investor) and Facebook deal guy Dan Rose.

But in this time, at least, the Twitter side was still not interested in selling at the price Facebook had offered.

The $500 million offered was in an all-stock form, said sources on both sides, at the $15 billion valuation that came from the Microsoft’s investment in the company last October.

The Twitter side felt that figure was inflated and the shares should be valued at the lower figures that have also been reported for Facebook’s true valuation, more in the $5 billion range.

That would have given the deal a $150 million price tag, which was seen as too low, especially since it was in Facebook stock and not cash initially.

In fact, Twitter wanted cash, which some sources say was offered by Facebook in the $50 to $100 million range, in addition to stock, but taking too much stock was still a major issue.

There are other ways the pair could have approximated a safer choice for Twitter, via warrants, of course, or other methods.

But, said several sources close to Twitter, the primary reason for not selling was because its board simply did not want to yet or perhaps ever.

Said one source: “The question is, is it really a good idea to sell on the first chance you get?”

Well, for Twitter, we’ll just have to wait and see about that, of course.

[Photo of Evan Williams by Joi Ito. Licensed under Creative Commons 2.0 By-Attribution license.]

Ah, the appeal of a fresh face is just irresistible to the press–OK, including BoomTown, except we posted more than a month ago!–with two major pieces, in Fortune and The Wall Street Journal, rolling out this week alone, with everything you wanted to know about the new COO of the social-networking site, former Google (GOOG) exec Sheryl Sandberg (pictured here).

But if you don’t have time to read them, here’s a quick synopsis of both:

Fortune: “Meet Facebook’s New Number Two” by Jessi Hempel

Details: Just 14 days into new job; Leg-tucking white Eames chair (pictured here); as Google’s VP global online sales and ops, ran everything!; she and Zuckerberg met cute at holiday party; aced Larry Summers’s midterm and final at Harvard public economics course, much to his shock, since he implies she was kind of chatty in class with friends.

Also Harvard MBA; obligatory McKinsey stint; Treasury Department in Clinton administration; picked 300-person Google over investment banking; always 10 steps ahead; Google.org mover and shaker.

Facebook aims: A need for corporate structure pronto; also time for the bigger picture; no more one-off decisions; more international growth; hiring senior managers; oh, yes, also must invent a new ad model for social networks.

But no silver bullets!; kicks ass, talks tough, then hugs all around (we did not make this up!); take out trash from Mark’s all-night Pizza-My-Heart-and-Red-Bull party (OK, we made that one up!).

Money quote: “This feels like Google when I started.“

The Wall Street Journal: “New Face at Facebook Hopes to Map Out a Road to Growth” by Carol Hymowitz

Details: Two weeks into new job; Biz dev guy Dan Rose is already sick of her (“It feels like she’s been here six months already.”); flip-flops endangered?; is able to argue why she is right by arguing how she is wrong; dangles data before engineers like fish before seals; easygoing but intense (when will these opposing dichotomies end?); crashed Harvard computers, but it was worth it.

Taught aerobics and was a stretching fascist; more cute dinner chatter with Zuckerberg before hiring; grew Google team from four to 4,000; a feminist and hangs with Gloria Steinem and Jane Fonda (see aerobics!) too!; Facebook pix of Argentine waterfall-leaning; went to high school in Miami; small kids, hubby; more 10 steps ahead and shoving people out of comfort zone.

Facebook aims: Employee performance reviews; processes for identifying and recruiting new employees; management-training programs; rally troops; stop the cash burn and up ad sales; close-knit culture must go, but you get hundreds of millions of new friends!

Also must figure out how to save Beacon’s bacon; earn trust of users, while frantically searching for a business model; wants frank feedback from staff and will publicly thank such person who gives it.

Money quote: “Facebook is a different space than Google, with tremendous potential to connect people, but it needs scale, it needs systems and processes to have impact, and I can do that.”