In a research note this morning, Greenfield asserts that, with just over a year to go on the News Corp. (NWS) unit’s search advertising deal with Google (GOOG), “it appears as though Google simply does not care about social search.” He contends it is difficult to imagine Google paying anywhere near what they were previously shelling out to MySpace, “especially as the inherent functionality of social networks is diminishing the importance of search.” The current deal expires in June 2010.

Greenfield estimates that MySpace will get about $300 million in revenue from Google in both the June 2009 fiscal year and in FY 2010, or about 35 percent of revenues in each year. He says there could be some competition for a new deal from Yahoo (YHOO), AOL (TWX) and MSN (MSFT), but he nonetheless sees a 50 percent drop in search fees. He also notes that Fox Interactive Media, the NWS unit that includes MySpace, is seeing costs increase even as revenues shrink.

Read the rest of this post

Everybody remain calm.

While it might have looked like it was the rapture for major Internet players yesterday–what with everyone and his mother getting sucked up into the Yahoo-Microsoft takeover tussle and disappearing into the ether of confusion that now reigns over the situation–it is best to keep moving toward the light of harsh reality for illumination.

And the reality in three parts, addressing the trifecta of big news yesterday, is:

I DO NOT LIKE MONOPOLIES, I DO NOT LIKE THEM, JERRY-I-AM

Google (GOOG) and Yahoo (YHOO) will not and, more importantly, cannot make any significant search-ad deal in any way longer than the two-week test they announced to terrific fanfare yesterday.

It is a regulatory no-no of such an obvious nature, that Microsoft (MSFT) has to prove almost nothing to win on the merits of the fact that Google dominates the arena with such power that it cannot be linked with anyone else.

But it is a nice image of one Silicon Valley company coming to the rescue of another, helping to show how Yahoo could be better monetized and, therefore, be worth more.

(Although irony-alert: Outside of Yahoo’s own self-inflicted wounds, it is Google that is most responsible for knocking Yahoo’s teeth out in the search and search ad game.)

So, any further hook-up between the two seems sure to become the Justice Department Lawyer Employment Act of 2008, the likes of which we have not seen since Microsoft got its turn at being deservedly whacked for being a monopolist back in the last century.

Let’s face it, outside of those who cannot seem to shake the annoying Kumbaya mentality over at Google, a Yahoo-Google partnership is simply fantastical, like some out-of-control Dr. Seuss ditty.

They could not, would not with a goat. They would not, could not on a boat. They will not share an algorithm, they will not, will not, Jerry-I-Am.

TROUBLE AHEAD, TROUBLE BEHIND

In a post I did just before the heating up of the AOL-Yahoo talks was reported yesterday, I had written:

“Yahoo is still ferreting away with execs from Time Warner and its AOL unit–you know, that rat’s-nest of a deal in which AOL, Time Warner investment dollars and, oh, some old fishing rod of former exec Don Logan’s is thrown into Yahoo for a 20% stake, along with perhaps a dollop of Google involvement for added complexity.”

And, maybe it is just me, or–except for the fine fishing rod–is anyone else a little worried about the potential disaster of an AOL-Yahoo mashup?

As someone who wrote two–count ‘em, two!–books on AOL, including a very detailed narrative of the horrific AOL merger with Time Warner (TWX) a few years back, a union from which both sides have never adequately recovered, I am plenty worried.

From a Time Warner perspective, I get it. It allows the company to unload the lodestone of AOL from around its neck and finally give it some value.

I might point out that Time Warner had ample opportunity to so do over the years (more on that, tomorrow!).

And its inability to make much of the online unit must be disappointing to its new CEO Jeff Bewkes, who hated the original AOL merger more than most.

While Time Warner and AOL like to point to the success of Advertising.com, and there are some various bright spots here and there (Truveo, TMZ, Userplane), its online ad business is still not dominant enough and other parts woefully behind the efforts of others.

And its recent $850 million cash purchase of the very nice, but distant-third Bebo social-networking site reeked of desperation rather than the aspiration it was meant to be. With MySpace and Facebook battling for the big numbers, only help from a large traffic site like Yahoo might work.

That’s not to say that some of its deeply underutilized assets, like AIM, would not be a good add to Yahoo. But the benefit to Yahoo–except as a way to try to escape from or shake down Microsoft for more money–seems negligible.

Lastly, given that it would be a stock transaction without the need for a shareholder vote, I cannot imagine that a large number of them would not freak out at the uncertainty of an AOL-Yahoo merger versus a solid number from Microsoft.

RUPE-A-DOPE

How jaw-dropping are the rascally wiles of Rupert Murdoch of News Corp. (owner of this site)?

First, he cozies up to Yahoo CEO Jerry Yang like a White Knight, but gets caught up in the fact that Yahoo does not want him to have too much power.

Then, Murdoch heads on up to Redmond to play footsie with Microsoft CEO Steve Ballmer, intrigued by the possibility of offloading MySpace and getting a better trade for it.

You just know he’s going to end up with the whole thing and Yang and Ballmer will be left scratching their heads over what just happened.

But, seriously, I am not entirely clear why Microsoft is also adding this level of complexity, even if it would give it a partner to add more money and assets to the deal.

I get the addition of MySpace might be nice. And so would some investment dollars from News Corp. (NWS).

And, most of all, I see how delicious it might be for Microsoft to be able to fire Google as News Corp.’s ad partner for MySpace (a firing, I suspect, Google might actually welcome, given its public complaints about the difficulty of monetizing social networking).

But I am not sure why Microsoft won’t just man-up and fork over a few more dollars to its original offer, which would end this circus pretty quickly.

My guess is that the deal-making fervor has gone to its head and it cannot just be seen as giving in to Yahoo’s exertions to show it really, truly could be worth more.

Ballmer should just deliver that need from Yahoo and do the deal.

And, for good measure, he might just consult Proverbs 16:18: “Pride goes before destruction, a haughty spirit before a fall.”

GETTING READY FOR THE RAPTURE

Finally, for those who want to rock out on the rapture, here is singer-songwriter Jill Sobule, singing about it onstage at D5 last May:

Please see this disclosure related to me and Google.

Sure, Yahoo (YHOO) continued its tango with News Corp.’s Rupert Murdoch (lots of those dramatic cross-country flights to meet in secret, like they were rendezvousing at Hernando’s Hideaway, details of which somehow always get leaked to the press).

In turn, while threatening a proxy fight, Microsoft (MSFT) trotted out its execs–including its iconic Chairman Bill Gates–to restate that its offer was “fair” and leaked its own internal memos, including emails from top brass to company minions.

So, one wonders, what could get this party started?

Well, for one, the looming March 13 date by which Microsoft might wage that proxy battle by naming its own board (including some high-profile tech figures it is looking for in Silicon Valley, as we reported here) could add some frisson to the situation soon.

But, what if, before that, Microsoft actually lowered its bid? It is not such an unlikely idea, according to many sources close to the situation.

That’s especially possible after Yahoo’s share of the search market showed continued weakness last week, even as the number of searches went up. According to comScore results last week, the second-ranked Yahoo clocked in with a 22.2% share of the market in January, down from 22.9% in December.

“The pressures are going to get worse,” said one person. “Time is not on Yahoo’s side.”

Indeed, if signs of business weakness at Yahoo worsen, several people suggested to me that Microsoft should make a slightly lower offer for Yahoo and promise the difference between its old bid and new one to Yahoo employees as a rich retention plan.

Is it such a crazy idea? BoomTown can tell you Microsoft execs had to have been annoyed when Yahoo rolled out a pricey severance plan last week to all its employees, as was first reported here.

The plan could cost Microsoft billions of dollars, if the company wins the Yahoo fight and lays off employees as part of the deal. Sources told me Microsoft execs thought it a stunt by Yahoo and not a very funny one at that.

And we need some fun right about now, don’t you think? So to start off the week right, here’s that infectious Pink video of her hit “Get the Party Started,” as well as the fantastic “Hernando’s Hideaway” number from “The Pajama Game”: