Yahoo’s embattled CEO Scott Thompson (pictured here) is set to step down from his job at the Silicon Valley Internet giant, in what will be dramatic end to a controversy over a fake computer science degree that he had on his bio, according to multiple sources close to the situation.

The pair will apparently say he is departing for “personal reasons.” Sources said that Thompson will be claiming to be leaving due to a serious illness that he recently discovered he had.

But the evolving crisis — which is just over a week old — centered on his botched resume and how he handled the thorny issue is the key reason for the abrupt end to his tenure as a CEO.

Thompson’s likely replacement on an interim basis will be Yahoo’s global media head Ross Levinsohn, who most recently also ran its Americas unit, including its advertising sales.

In addition to the management upheaval, Yahoo’s board is closing in on a settlement with the man who discovered Thompson’s misstep, activist shareholder Daniel Loeb of Third Point, said sources.

The situation could change, since Yahoo’s full board still has to meet this morning to officially approve the sweeping changes at the long-troubled company.

But, if it is, this development goes a long way toward fixing some of what has been ailing Yahoo recently.

And it’ll also be a stunning victory for Loeb (pictured here), since the pugnacious hedge fund investor is set to get three board seats from a slate proposed by him as part of a proxy fight aimed at Yahoo. The new Yahoo directors will be media exec Michael Wolf and turnaround specialist Harry Wilson. Loeb’s fourth selection — former NBC head Jeff Zucker — will withdraw.

The five current Yahoo directors — who were to step down at the company’s annual meeting this summer — will leave the board effective immediately, sources said, to make way for the Third Point selections.

Finally, Yahoo’s recently added director Fred Amoroso will be named chairman of the board.

Amoroso is the director who has been conducting the investigation into the issues raised by Loeb about how the fake academic credentials got in Thompson’s public bios, as well as in Yahoo’s regulatory filings, and also the hurried circumstances around his hiring in January.

Those mysteries — read, screw-ups — might never be solved now, although Thompson made a convoluted attempt to explain it all in two awkward employee meetings at the end of last week. In those gatherings, according to numerous sources, he blamed a headhunting firm for introducing the mistake when he was being hired for a job at eBay in the mid-2000 timeframe.

That company, Heidrick and Struggles, slapped back last week with an internal memo, noting that Thompson’s claim was “verifiably not true.” Sources said that Heidrick told Yahoo’s board that it was in possession of a resume that Thompson had apparently submitted showing the inaccurate CS degree on it.

That memo, impugning Thompson’s credibility, was one of many that piled on to create an impossible situation for the Yahoo board, related to his leadership ability going forward.

Thompson had also previously issued a Yahoo statement, in which he apologized for the “distraction” caused by the problematic resume, but not for the mistake itself.

And, initially, Yahoo — under his direction — had called the borked resume an “inadvertent error.”

Such fumbling to fix the situation was among the many other issues that the board has been considering relating the ability of Thompson to remain in his job. Also of importance was the sinking morale of Yahoo employees, who had largely rejected Thompson’s excuses in the ResuMess scandal.

Internal message boards at Yahoo lit up all last week, with staffers largely rejecting his explanations. In addition, a number of top execs and engineers approached the board calling for Thompson’s firing.

While that’s not precisely what happened here, it’s close enough to describe Thompson’s departure as inevitable.

All this change comes in the wake of a massive restructuring he was in the midst of at Yahoo, after 2,000 employee layoffs.

Thompson was pushing forward a vision of adding a much more significant data and commerce element to Yahoo’s largely ad-based business.

That is likely to be less stressed under media-focused Levinsohn, who will be essentially trying out to be the permanent CEO.

Well known in the media and advertising communities, he has worked at a number of big online efforts over many years.

According to his bio at Yahoo, where he arrived in 2010:

He previously served as the President of News Corporation’s Fox Interactive Media, where he was responsible for the day-to-day operations, strategy and acquisitions that helped transformed the company into a leader in digital media. He also held senior management positions with AltaVista, an early pioneer and leader in search, CBS Sportsline where he oversaw all content and development for the top rated sports site, and HBO where he launched and oversaw a unit developing new programming and revenue streams. Levinsohn also was the co-founder and managing director of Fuse Capital, an investment and strategic equity management firm focused on investing in and building digital media and communications companies.

Levinsohn sits on the board of Freedom Communications and the Bogart Pediatric Cancer Research Program. He holds a Bachelor of Arts in Communications from The American University.

So far in my checking, Levinsohn’s resume is accurate.

More to come, obviously.

I have emails and texts and calls into everyone for comment, but apparently they are all out at a Mother’s Day brunch (except me).

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
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• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

While he has only been CEO of Yahoo for less than five months, in the next several days Yahoo CEO Scott Thompson is facing perhaps the most critical moment of his short tenure.

According to sources with knowledge of the situation, the board of Yahoo is not likely to take long in assessing whether he will stay or if he will be let go, due to a controversy around how a non-existent computer science degree got on his bio and also in Yahoo regulatory filings.

A special committee of independent directors is now investigating the matter, including trying to assess the damage has had on Thompson’s ability to lead the Silicon Valley Internet giant.

How quickly the board moves is likely to be a sign of their intent. If within the next days, it is likely to let the former president of eBay’s PayPal payments unit go and replace him with a current company exec; if it waits longer and shows some public support of him — which the board has not done since the scandal erupted — Thompson’s chances are better that he will only be given some sort of censure.

One important task is also closely considering the impact of possible legal problems related to Thompson and others signing documents with the Securities and Exchange Commission that were not accurate.

One thing is clear from interviews with multiple sources, many members of the board have not been happy with how Thompson has handled the matter since activist shareholder Daniel Loeb of Third Point uncovered the problem a week ago.

While first tossing the borked bio as an “inadvertent error,” Thompson was then largely silent about the issue with staff, despite being in close meetings with them, which caused stress among key execs.

Then, he made a public announcement in which he apologized for only the “distraction” caused by the incident and not the error itself as some had hoped he would.

Yesterday, apparently feeling it was time to try to explain things face-to-face, Thompson made another attempt to explain what happened in two separate meetings with his direct reports and then his senior staff, apparently trying to get through to employees that he did not fake his resume nor did he give an inaccurate bio to Yahoo when he was being hired for the job earlier this year.

Thompson thought it was time — now that the board investigation was underway — to answer questions directly, said a source.

Among other things, Thompson gave a somewhat convoluted explanation that it appeared in his bio due to a misunderstanding during an interview with a headhunting firm. And that he never noticed it once it proliferated And that when an NPR interviewer asked him directly about his CS degree, he did not want to correct her in mid-discussion — although others report he said he did not hear the question fully.

Sources said Thompson — who is on the midst of initiating changes across a large and troubled organization, after laying off 2,000 employees — thought the sessions went well, that he clearly communicated that he was taking blame for the problem and its repercussions. Those sources also noted that he received support for doing so after the talks.

But, more than a dozen others I interviewed who were listening remotely — some of whom I sought out and some who contacted me directly — thought Thompson’s complex explanation was deeply problematic and that he tried to foist the blame on others rather than on himself.

Every one of these people expressed the need for him to step down to allow Yahoo to move forward.

What the board thought about the performance is still not clear, said sources, but things are coming down to two distinct scenarios.

The first is a quick parting of the ways with Thompson, within days, either for cause or via a negotiated settlement. Others at Yahoo involved with perpetuating the mistake in the bio are also at risk.

This option is perhaps the more likely at this moment, unless the scandal dissipates and employees continued rancor over the situation can be assuaged soon.

In this case, sources said, Thompson will be replaced by a current board member or a member of the top staff. When directors fired Carol Bartz last fall, CFO Tim Morse became interim CEO and he is one of the likely candidates for the job again.

The second scenario centers on needing Thompson to complete a number of complex transactions related to the sale of Yahoo’s Chinese assets and its re-negotiations with Microsoft over its troubled search partnership, among other things.

In that case, Thompson will be censured in some manner by the board and will also probably have to endure some punishment for allowing false regulatory documents to be filed by Yahoo. Others at Yahoo will also be subject to the same treatment in such an outcome.

How will it turn out?

Only board member Patti Hart has so far paid for her faulty vetting of Thompson, stepping down from the board earlier this week.

But whether she will be the only shoe to drop in what has turned out to be a bizarre wildfire that as raged across Yahoo’s troubled landscape remains to be seen.

Thus, most definitely watch this space this weekend.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

We’re literally no longer indexing text. We’re trying to associate data that exists on the web in all forms with the physical object that spawned it in the first place.

– Bing director Stefan Weitz, in an interview with Fast Company’s E.B. Boyd

This according to University of California law professor Eugene Volokh, who argues — in a Google-commissioned report — that ranking and placement of the company’s search results merit the same free-speech protection as articles in a newspaper.

“Search engines select and sort the results in a way that is aimed at giving users what the search engine companies see as the most helpful and useful information,” Volokh writes. “In this respect, each search engine’s editorial judgment is much like many other familiar editorial judgments.” In support of this argument, he offers a few examples:

• Newspapers’ daily judgments about which wire-service stories to run, and where to feature them
• The judgment of sites such as DrudgeReport.com about which stories to link to, and in what order to list them

There are others, as well, but these two get to the heart of Volokh’s argument: Search results are, at their core, editorial judgments; ergo, if Google were to prioritize its own services over the services of its rivals in them, that’s an entirely legitimate exercise of its First Amendment rights.

In other words, search is speech. And rivals claiming that Google is abusing its market power by favoring its own content over others’, or dropping a site’s ranking or otherwise manipulating its search results (something Google maintains it does not do), may have no other recourse than to accept that those actions, whether they occurred or not, are shielded by the First Amendment.

“Google, Microsoft’s Bing, and Yahoo Search exercise editorial judgment about what constitutes useful information and convey that information — which is to say, they speak — to their users. In this respect, they are analogous to newspapers and book publishers that convey a wide range of information from news stories and selected columns by outside contributors to stock listings, movie listings, bestseller lists, and restaurant guides,” Volokh concludes. “And all of these speakers are shielded by the First Amendment, which blocks the government from dictating what is presented by the speakers or the manner in which it is presented.”

I suppose, if you buy that Google is truly a speaker and not just a conduit for speech.

In any event, it’s an interesting argument, and one that will no doubt see further elaboration if the U.S. Federal Trade Commission launches an antitrust suit over complaints that Google has rigged its search results to the detriment of rivals like Yelp.

(Image courtesy of Shutterstock)

Even as Yahoo’s board was kibitzing all weekend about how to handle the continuing resume-padding controversy around its recently hired CEO Scott Thompson — including hiring its own outside crisis communications firm to represent it — he was working the phones to keep top staff apprised of the evolving situation.

While Thompson told those he spoke to that he was limited in what he could say and blamed a “personal vendetta” by an activist shareholder for his troubles, being proactive in this regard is probably a good idea.

That’s because multiple sources said he said exactly nothing in various strategy meetings with top employees last week about allegations leveled by Dan Loeb of Third Point, which proved correct, that Thompson had not gotten a computer science degree in college, as his longtime bio had claimed.

“It was the gorilla in the room and it was awkward in the extreme,” said one exec present at the meetings. “He never brought it up, which was even worse.”

At this point, it seems unlikely that Thompson can regain the confidence of many at Yahoo — even though a company spokeswoman said he received a lot of incoming support too, both externally and internally — until he can render some cogent explanation about how the borked bio got into both Yahoo’s public site and also its more critical regulatory filings.

Even more mysteriously, how the error was never present in filings with the Securities and Exchange Commission made by eBay, where Thompson led its PayPal payments unit, although his public eBay bio has also been wrong for close to a decade.

And, most of all, how was it that Thompson never caught the mistake himself — even when directly asked about it — despite the likelihood of reviewing it multiple times over those many years and ultimately certifying it for Yahoo’s own SEC filings.

Calling Encyclopedia Brown to solve the Case of the Computer Science Degree That Wasn’t!

Thompson has given no explanation about the debacle to the bulk of the Yahoo staff at all levels, save for an information-free and terse note to employees on Friday afternoon that essentially asked them to focus on their work instead of his bizarre crisis.

Unfortunately for him, many Yahoos are focusing a lot on Thompson, with message boards at the Silicon Valley Internet chastising their CEO and giving him support that is tepid at best. From interviews I have had with two dozen employees this weekend, to say morale is at an all-time low is perhaps understating the situation.

Here is a short selection of comments that were read to me, for example:

“Resume padding is one thing, but lying about something that is so easy to check is puzzling.”

“There is no reason to let it slide by … This isn’t some guy who’s trying to impress a date … It’s sad that we just accept this kind of stuff from corporate heads and politicians.”

“Having some document to prove you can do a job is not all that important, lying about it is.”

What appears to trouble employees the most in the threads I was read was the nonchalance of the initial Yahoo statement about the issue, which called the addition of a fake degree on Thompson’s bio an “inadvertent error.”

“From a pure employee perspective, it feels like it is a violation of their principles,” said one person, reflecting a dozen or more conversations I had this weekend up and down the organization. “And anyone else would probably be immediately fired for this, even with an explanation.”

Said another: “He clearly knew and lied for years; and his handling since exposed has been unacceptable.”

As I noted above, a company spokeswoman said there was also much support for Thompson (pictured here) within the company, but declined to provide any quotes or details.

Presumably, some answers will be coming from a board investigation aimed at getting to the bottom of the situation, including trying to grok who put the error in the bio in the first place.

My bet: They’ll try to pin it on a lower-level minion, although that will not fly with a lot of people.

Including me, because whoever typed in the faux degree, its presence there has been too long for Thompson not to be responsible for it.

Flunky error or not, there are important questions about whether Thompson himself provided a bio that contained the inaccuracy to the board when he put himself forth for the job via direct emails to Yahoo director and Intuit CEO Brad Smith.

That line of thought basically boils down to: Can Thompson not read?

More problematic is the fact that the placement did not come via Yahoo’s headhunter on the CEO search, Heidrick & Struggles, which apparently was not charged with doing a background check on Thompson.

Instead, the director in charge of the search, Patti Hart, sources said, hired another forensic firm, which appears to have missed Thompson’s erroneous academic record.

The only thing completely clear amidst all the confusion: Hart screwed up by botching an extremely simple part of a vetting she was charged with. That makes her vulnerable, of course, along with other Yahoo board members or staffers closely involved in the talent search.

While Hart (pictured here) is in a much dicier position, Thompson still appears to have initial board backing — at least for today — as it’d be a very tough call to fire yet another CEO so quickly in the middle of several key deals for Yahoo, as well as a proxy fight.

Said one person close to the situation, the board is still considering its “options,” in an effort that is being led by independent board member Fred Amoroso.

So, it will be instructive to see how the board will proceed tomorrow — especially since it is likely that Loeb will lob a lawsuit to try to get more information on the Thompson hiring process.

But it’s started by hiring its own outside communications firm, Sard Verbinnen, which has handled other crises for Yahoo in the past.

Sard’s Charles Sipkins — welcome back, Charlie! — had no comment about the board’s next move, except to reiterate its statement from last week that it is looking into the Thompson bio mess and will make appropriate disclosures at some point.

We can’t hardly wait.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

Earlier today, Yahoo’s persistent thorn, activist shareholder Dan Loeb of Third Point poison-penned another letter to the board of the Silicon Valley Internet company, demanding that Yahoo fire its new CEO Scott Thompson, as well as director Patti Hart, over bizarre inaccuracies related to their academic achievements.

“Permitting Mr. Thompson and Ms. Hart to stay with the Company after apparently violating the Code of Ethics sends a message to all Yahoo! employees that a different set of rules applies at the top,” Loeb wrote.”[Yahoo must] terminate Mr. Thompson for cause immediately given his demonstrable unsuitability to remain Chief Executive Officer and a director of Yahoo! and accept the resignation of Ms. Hart for similar reasons.”

And while many across the blogosphere — including some very clever tweets — called for his head tout de suite, that’s just not going to happen.

At least for now, at this early point in a controversy over Yahoo filing legal documents that misrepresented Thompson’s long-ago degree from Stonehill College.

In a nutshell: Thompson does not have a computer science degree, as he had maintained he did in public bios for almost a decade, a falsehood that mysteriously seeped into documents Yahoo filed with the Securities and Exchange Commission.

That’s bad news for Yahoo, for sure, on many levels, but moving against Thompson at this moment is not likely to be the answer — for the short term, at least.

That’s due to many reasons, that I like to think of it as three hopelessly complex puzzles that need solving pronto.

The What-Did-Yahoo-Know-and-When-Did-It-Know-It Question

There is no question the first thing Yahoo’s board needs to do is a thorough investigation to determine how a borked bio could proliferate so widely and for so long.

Most importantly, Yahoo will have to reveal if Thompson actually gave them this incorrect information, as he aggressively lobbied for the then-open CEO job.

As I had previously reported several times, Thompson cold-emailed a Yahoo director — Intuit CEO Brad Smith, as it turns out — despite not being on the list of potential candidates. Thompson was then shuttled over to Hart, who was running the vetting process with the help of headhunting firm Heidrick & Struggles, and hired within weeks.

Oddly, sources said Thompson never filled out the required informational papers for the job, nor did Heidrick conduct the normal background check on him. Instead, another forensic firm Yahoo hired did the work.

If it turns out Thompson gave any of them the bad bio info, it would be quick curtains for him.

But if Yahoo’s board members obtained his info on their own, the next key query would be how no one at Yahoo — especially its legal and compliance staffers, as well as outside help — managed to catch the problem during the vetting of Thompson.

Here are some good questions to start with:

Who put a faux computer science degree on Thompson’s bio in the first place, why and when did it happen?

Where did Yahoo get the inaccurate information?

Who was in charge of checking Thompson’s academic record for Yahoo?

And, who checked the work of the checkers?

The problem is made more complicated, because correct information was easily available in the SEC filings of eBay for years, since Thompson was head of its PayPal payments unit.

While the resume information was indeed wrong on eBay’s Web site and on numerous bios of Thompson for years, how did eBay legally get it right while Yahoo did not?

That calls into question the expertise of the company, its directors and those they hired to make sure execs were completely on the up and up, a task they clearly failed at.

If rank incompetence is the reason, which it looks like it might be, expect certain board members and other Yahoo staffers to go, along with anyone who helped in the Thompson vetting, or lack thereof.

Unless, of course, the gang-that-couldn’t-shoot-straight actually did shoot straight and some one at Yahoo found out about the educational discrepancy before the new CEO was announced, but declined to fix it.

While sinister, such a scenario is not entirely implausible, given how much pressure Yahoo was under at the time to hire a CEO quickly, due to Loeb and his looming proxy fight.

If any evidence were to surface that this was so, it is curtains all around, which would rain the kind of disaster down on Yahoo’s Sunnyvale HQ that would make Loeb’s attacks look like a Nerf battle. Instead, it would be “The Hunger Games” — except that no one survives.

The Chaos-in-Sunnyvale Conundrum

Which brings us to the profound implications of Yahoo jacking its second CEO within six months.

While it’s easy to yell “Fire the CEO” on a crowded Twitter, it’s simply not so easy in practice.

How long did it take Yahoo’s lugubrious board to figure out Carol Bartz needed to go? A … long … time. (And, she had a CS degree!)

More to the point, Thompson — and his not-so-merry band of consultants from Boston Consulting Group and, this week, McKinsey & Company — has only just completed a massive layoff of 2,000 employees and a jarring restructuring of management.

He’s also in the early stages of rolling out a new and decidedly still-squishy strategic plan to top execs (also just this week), along with working on some other key initiatives.

That includes renegotiating its search partnership with Microsoft; noodling around on a possible deal with Google; contemplating the sale of a variety of assets; and — oh, yes — trying to take on social networking Godzilla Facebook over patent infringement.

Busy much?

But, most importantly, Thompson is now the umpteenth Yahoo CEO to be working on the never-ending talks with its Asian partners over selling back a piece of the company’s lucrative stake to them.

While Yahoo CFO Tim Morse and head lawyer Mike Callahan are the point men on the deal, the lack of CEO would be an issue in the now-proceeding again talks.

This is a sale that must — and I underscore must — get done and soon, giving Yahoo much-needed breathing room and a whole lot of cash to fork over to increasingly disgruntled shareholders.

So, expect Yahoo to try to milk that deal for all it’s worth in the coming week, in order to give the appearance, at least, of positive forward momentum.

And, like it or not, Thompson has to play a key role in it getting done.

Thus, the likelihood of wait-and-see over point-and-shoot on Thompson is higher than you might think.

That’s especially true given four members of the board are leaving within six weeks and have either or are in the process of being replaced by new members.

Then, Thompson will be their problem to solve.

Again, no small thing, since the old crew — led by feckless Chairman Roy Bostock — is not likely to want to end its appalling tenure with yet another disaster.

Such a move would further tarnish the legacy of its outgoing directors, although I am not sure how it could be any more sullied, given their consistent record of one bad decision after the next.

What do I really think? I think this cursed board will maintain its 100 percent score of doing the wrong thing at the right time.

It could be a different case with the new directors, of course, who all seem pretty sharp and not as easily impressed by a record of failure.

They will surely be monitoring Thompson carefully, as will employees, who have taken to internal message boards with a rage not seen in a while over the resume debacle.

Their morale might be one uncertainty impacting Thompson’s fate. If a lot of key employees continue to bolt Yahoo or those remaining more loudly express their disdain for the bio antics, the new directors might listen.

The Whatever-Loeb-Says-We-Won’t-Do-Till-Later Head-Scratcher

Which brings us back to Loeb, whose noisy campaign to grab seats on the Yahoo board has certainly hit home this week.

And, though Yahoo likes to ding him a lot, since he started his campaign of terribly entertaining investor terror, a lot of what he’s been calling for has happened.

That includes a major flushing of the board — with five longtime members, including co-founder Jerry Yang, going, going and gone.

In addition, Loeb brought pressure to slow down some questionable deals, from Yahoo’s PIPE dream to a tax-free spinoff in Asia in a deal only an accountant could love.

He’s also — though they try to deny it — got the Yahoo directors in the dangerous habit of reacting to him, rather than playing their own game.

While the Yahoo board has resisted any deal with Loeb (pictured here), blaming him for rejecting their kind offers of settlement, it is he who is setting the tone more than Yahoo.

And that tone is of alarm and trouble and chaos at Yahoo.

That’s not going to work to convince other Yahoo investors to back his cause — in fact, Loeb has a decidedly uphill battle to win his proxy challenge — he has still scored a direct win with the bio relevations.

So far, though, Loeb has not sunk Yahoo’s battleship, so it is unlikely the board will acquiesce to his latest demand of Thompson being fired by noon on Monday.

Maybe it will eventually, or maybe it will just scold Thompson or maybe it will do nothing at all.

All that is an unknown — a riddle, wrapped in a mystery, inside an enigma, with a lot of managerial incompetence thrown in. And that, most of all, is the sad definition of today’s Yahoo.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

Yahoo just released a statement that its board will “review” today’s revelation that the bio of its CEO Scott Thompson contained an error related to his educational achievements and will make “appropriate disclosure” about what happened.

On both the Web site and in the regulatory filings of the Silicon Valley Internet giant, Thompson is described as having a degree in both computer science and accounting from Stonehill College.

He does not have a degree in computer science from the Boston-based school, but does have a Bachelor’s of Science in Business Administration (Accounting).

Yahoo said in full in its statement:

“In connection with the statement the company made earlier today about Scott Thompson, the Yahoo! board will be reviewing this matter, and upon completion of its review, will make an appropriate disclosure to shareholders.”

Earlier today, Yahoo first blamed the issue on an “inadvertent error” — but provided no further details — which sources said did not sit well with the board.

“Many members of the board are deeply concerned,” said one person with knowledge of its thinking. “This is a problem on a lot of levels, especially related to the trust of shareholders.”

Indeed, especially since the news came to light via activist shareholder Dan Loeb of Third Point, who is agitating for board seats via a proxy fight.

Loeb’s efforts to impugn Thompson appear to have caused some level of damage, at least in terms of perception about the level of vetting that was done when the former president of eBay’s PayPal unit was hired earlier this year.

In fact, the error has been around for a half-dozen years, which begs the question of why Thompson never noticed it.

While his bio on filings made by eBay to the Securities and Exchange Commission were accurate, the one on the online commerce site’s Web site incorrectly said he had a computer science degree.

It is not known who introduced the error there.

But the inaccuracy moved inexplicably to both Yahoo’s corporate Web site and also its SEC filings, and the company declined to provide any details earlier today as to how that happened.

It’s not clear what happens next, or if there are any legal implications, beyond a needed correction by Yahoo with the SEC — which already took the entire line about Thompson’s education off his Web bio today.

As I wrote earlier today:

Thompson himself is probably not at risk unless it can be definitely proved he was the one who misrepresented having the degree in the first place. He can simply say he had no idea who added it to the eBay Web site and that he did not notice it there on the Yahoo Web site and SEC filings.

While that makes him look careless, how big a deal it becomes with shareholders, as well as Yahoo employees, is also an unknown. While a computer science degree is not a requirement for a CEO of a tech company — both Facebook’s Mark Zuckerberg and Microsoft’s Bill Gates dropped out of college and did pretty well in computer science anyway — tech resume padding, even inadvertent, is not a characteristic that is going endear Thompson to anyone.

The controversy could not have come at a worse time — Thompson was actually in meetings all day yesterday and today with senior staff, following recent layoffs of 2,000 and a massive restructuring, to discuss plans for moving the long-troubled company forward.

And besides the proxy fight, he is also dealing with selling off Yahoo’s Asian assets, renegotiating a new search deal with Microsoft, and also trying to figure out what parts of Yahoo to keep and what parts to jettison to improve its prospects.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

Earlier today, Yahoo released a letter talking itself up to investors, introing a new Web site called Yahoo Forward to do more bragging and — you guessed it — giving yet another smackdown to activist shareholder Dan Loeb of Third Point.

The move comes as the proxy fight over the Silicon Valley Internet giant moves ever closer to its annual meeting, which is set to take place sometime this summer.

In the letter, which had precisely zero new news, Yahoo recounted again that it tried hard to settle things with its disgruntled shareholder, but underscored its desire not to have Loeb on the board.

Why? Because the man who owns about six percent of Yahoo — which is about 99.99 percent more than any other current board member, which seems to make him pretty interested in Yahoo’s fate — is not qualified to be a director.

“The board continues to believe that Mr. Loeb himself does not bring the relevant skill set and experience to the board, particularly in comparison to the candidates selected by the board,” the Yahoo letter read. “In addition, we believe that, based on the specific qualifications of Third Point’s nominees relative to Yahoo!’s business and opportunities, the candidates nominated by the board’s Nominating and Governance Committee are significantly superior to those proposed by Third Point. “

Buuuurn! (Not really.)

Loeb has his own Web site, Value Yahoo, which he launched last month to pillory Yahoo. He used it today to post an infographic titled “The Incredible Shrinking Yahoo.”

Buuuurn! (Not really.)

In fact, the real fire could start as early as next week and in the months ahead when other Yahoo investors start to pick sides in the fight.

That should really begin when independent proxy advisory firm Institutional Shareholder Service gives its recommendation on the issue to Yahoo investors.

A backing by ISS for another prominent proxy advisor Glass Lewis will help Loeb, although he still has an uphill battle to convince other shareholders to vote down Yahoo, which has a new CEO in Scott Thompson and a mostly new board.

That will be even more difficult, given how active Thompson has been in making a ton of productive-sounding moves, such as a recent restructuring which included 2,000 layoffs. While results will not be in for a while, a lot of we’re-hard-at-work strategery noise is probably a good tack for Yahoo.

The company will surely try to drop some more Yahoo bombs on Loeb to burnish its chances in the coming month — most likely first around a taxable sale of a large portion of its Asian assets related to new rounds of talks now taking place again, which might include a fat dividend to investors.

(Investors like fat dividends and the people who give them fat dividends, by the way!)

The company could also sell off some of its underperforming units, such as its advertising technology business and renegotiate its search partnership with Microsoft, all of which will give Yahoo more of a case that Loeb’s complaints are now unfounded.

But don’t count Loeb out, either. He’s a deft campaigner and also deserves some credit for forcing Yahoo to make several of its recent moves to oust weak members of its longtime dysfunctional board.

In that regard, at least, Loeb has been very relevant.

Here’s Yahoo’s letter today, in full (the odd bolding is all done by the company):

Yahoo! Shareholder Letter Outlines Forward Momentum and Urges Election of Its Board Nominees

SUNNYVALE, California, May 2, 2012 — Yahoo! Inc. (NASDAQ: YHOO), the premier digital media company, today released the following letter to all shareholders from its board of directors:

Dear Shareholder,

Since last August, Yahoo! has moved forward aggressively, implementing a plan to position itself for future success and to increase the value of Yahoo! for you, our shareholders.

* Just four months ago, we appointed CEO Scott Thompson, a highly accomplished and dynamic leader with the experience and expertise required to lead Yahoo! to renewed growth, innovation, and success. Scott is already moving the company forward fast — dramatically reorganizing the business around its core strengths with a mindset of focus, speed, discipline, and putting the customer first.

* The company has reconstituted the board of directors, with the optimal mix of expertise, experience, and fresh perspectives to accelerate the company’s transformation. We recruited five new, highly qualified independent directors through the Nominating and Corporate Governance Committee’s thorough search process. In addition, four of our directors volunteered not to stand for re-election at the 2012 shareholders’ meeting. As reconstituted, following the annual meeting a majority of Yahoo!’s directors will be new to the board this year, and all directors will have joined the board since 2010.

* Following a detailed and diligent review in an accelerated timeframe, the company produced a comprehensive strategic framework that will change what we do and, most importantly, how we do it to enable us to put our customers first in everything we do. We will deliver fun, engaging, and personalized experiences on all screens and forge strong relationships with our advertisers by producing measurable results, including consumer insights derived from our vast data, and delivering a higher rate of return on advertising spend. Specifically, we will focus all we do on the consumers who trust us to deliver personalized content and communications in our core businesses, and on the advertisers who want to connect with our consumers. Just as importantly, we are identifying what we will no longer do, in order to direct resources toward those businesses that generate the highest consumer engagement and the best return on our investment. As we excel in our core business, we will earn the right to pursue new growth opportunities.

* With this renewed operational focus, the company has defined a new organizational structure to support our core business and put resources closer to our customers. Effective May 1, Yahoo! will operate in three groups — consumer, regions and technology — all supported by our corporate teams. Each of these three groups will have clear accountability for getting results by delivering the best customer experiences. This more efficient structure will enable faster decision-making and more effective delivery of innovative products and services that measurably impact the bottom line.

* Beyond our core business, we are committed to continuing to be prudent stewards of our non-core assets and investments and to be thoughtful and diligent about monetizing their significant value at the right time and in the right manner. Should we do so, returning capital to shareholders will be a high priority.

In identifying qualified new members for the board, the Nominating and Corporate Governance Committee, led by its independent chairperson Patti Hart, conducted a thorough and impartial search process. Working with a leading executive recruitment firm and using the committee’s desired skill sets and experience for new board members, the committee identified over 100 potential candidates and sought input from a number of our major shareholders. Committee members engaged with over 20 individuals, including the four nominees proposed by Third Point. Committee members then conducted numerous in-depth interviews and carefully analyzed the qualifications of each candidate, including each of Third Point’s nominees. Committee members conducted additional interviews with those candidates that warranted further consideration, as determined by the committee in its meetings held throughout the process. Following completion of the full process, the committee and the board determined that the distinguished group of five candidates recently announced were the best choices, based on their individual accomplishments, experience directly relevant to Yahoo!’s business and its challenges, and records of value creation.

The new directors have strong records of significant accomplishment at the highest levels of media, advertising, marketing, Internet, technology, and finance, including corporate finance and restructuring, and insight into customers’ perspectives. The continuing directors are independent thinkers who bring impressive track records of success, and have been actively and constructively engaged as the company has developed its strategic framework to deliver renewed success and value to shareholders. We are challenging Yahoo!’s entire leadership team by asking tough questions, establishing rigorous goals, and developing a framework for strict accountability to move Yahoo! forward … fast.

Our focus now is on operating the company so that it delivers superior value to our shareholders. Supported by the many talented people who have contributed to charting our new course and inspired by the many shareholders, customers, and employees who have communicated passion for this great brand, we know that we will succeed.

Regrettably, our efforts to avoid a proxy contest with Third Point were unsuccessful. Following the recommendation of the Nominating and Corporate Governance Committee, we offered Third Point two board seats, including one of its nominees and a second mutually agreeable candidate, which would bring Third Point’s perspective into the boardroom. Unfortunately, Mr. Loeb declined to end his proxy solicitation on that basis, insisting that there could be no settlement unless he was personally appointed to the board. The board continues to believe that Mr. Loeb himself does not bring the relevant skill set and experience to the board, particularly in comparison to the candidates selected by the board. In addition, we believe that, based on the specific qualifications of Third Point’s nominees relative to Yahoo!’s business and opportunities, the candidates nominated by the board’s Nominating and Governance Committee are significantly superior to those proposed by Third Point. Nevertheless, we want to emphasize that we remain committed to an open dialogue with all our shareholders and to working in a constructive manner with Third Point.

At the end of the day, we recognize that you, our shareholders, will make the decision as to the board you want to lead your company. We are confident that when you assess our new board’s qualifications against Third Point’s slate, you will come to the same conclusion that we did—that this is the right board with the right mix of skills and experience to lead the company forward to create value for shareholders. We also recognize that we have a great deal of work to do to support and challenge the management team to move the company forward fast. We intend to keep ourselves and the company focused and we do not intend to let ourselves be distracted from the work at hand.

Yahoo! is looking forward, focused on delivering superior value to all of our shareholders. We are building momentum with a great leadership team, unified in focusing the company on its core strengths, redeploying resources to the most productive areas of the business, and equipping the company to invest in growth and innovation. Your new board includes individuals who have proven operating expertise in media, advertising, marketing, Internet, technology, and finance, and have consistently proven to be thoughtful and responsible stewards of shareholder value, with a strong emphasis on disciplined capital allocation and a willingness to embrace structural change. They are already contributing to the rigorous action plan to realize Yahoo!’s potential and deliver increased value for shareholders.

With new leadership and the new board, we are building a stronger, nimbler, more profitable Yahoo! that is better equipped to innovate for our customers and will ultimately increase the value of Yahoo! for all shareholders.

You can read more about Yahoo!’s actions to move the company forward and create shareholder value at http://yahooforward.com.

Thank you for your support.

Yahoo! Board of Directors

Let’s begin by drawing the distinction between a tool and a robot. Tools enable us to work more efficiently. Robots do the work for us (in fact, the original word robata means “hard work” in Czech). The vast majority of the Web sites and apps we use today are tools that enable us to work, play and share more efficiently. Over the last few years, through advances in artificial intelligence and data science, Web sites and apps are evolving. There is a new breed of applications focused entirely on working on our behalf. As humans, we constantly seek means to reduce the amount of work needed to reap rewards from a system. While the tools of today allow us to work less, the robots of the future will eliminate much of the work in the first place.

This incredible transformation is happening right before our eyes.

Your Search Robot

A long time ago, we would search for information by painstakingly looking up sources in a card catalog and reading a book. As much of that knowledge moved online, the directory (like Yahoo!) enabled us to browse and find content of interest. In time, the amount of information flowing online overwhelmed the directory — it would simply require too much work to browse the entire Web. Fortunately, a revolutionary tool, search — Google, really — made it very easy to find the documents that contain the answers we’re looking for. But while search presents us with a huge set of choices, it still takes a lot of work to find the answers.

Today, a new technology is eliminating that work by acting on our behalf to find the answers and even solve our problems. Siri is an artificial intelligence client that turns our devices into a virtual assistant. It removes the steps between searching for answers and finding them. Have a question about converting metric units? Ask Siri. Need to order your mother flowers? Let Siri handle that. Need to make dinner reservations for your date Friday? Let Siri do the work for you. And we’re just scratching the surface. We possess the vastness of all human knowledge in our pockets, yet much of our usage is limited to Angry Birds. This transformation to intelligent machines means we no longer have to work as hard to apply the knowledge locked in our devices; they’ll do the work for us.

Your Location Robot

In the 20th century, an enormous yellow book was delivered to our doorstep every year. We would heft this behemoth and flip through hundreds of pages to find a local business or restaurant of interest. Eventually, that process gave way to more efficient tools as local information moved online through apps like CitySearch and Yelp. Recently, via the mobile check-in, we can be presented places of interest and people near our current location. This new layer of geographical context is great, but checking in is still work.

Today, ambient location apps like Foursquare, Radar and Highlight are beginning to do that work for us. By passively monitoring our locations, they alert us to interesting people and places around us. Over time, as they learn our preferences, they’ll be able to filter these places and help us discover the best restaurants and people wherever we are. At last, we are within reach of the “Danger, your ex-girlfriend is in the area!” robot.

Your Personal Robot

Not that long ago, the primary way we would discover new media was through browsing a printed newspaper, magazine rack or record store. As this content moved online, it became much more accessible and real-time. As the option pool grows, we have to put in more and more work to find the content that’s interesting to each of us. There are more and better options than we could ever imagine. But it would take an incredible human effort to find all the needles in the growing haystack.

To address this, many Web sites have offered customization tools for users to focus their experience. But manual customization also requires a lot of work, and it usually fails to paint the rich, dynamic picture of who we are and what we like. Fortunately, a solution is emerging from companies like Pandora (and, full disclosure, my own company, Gravity). Using machine learning, these platforms get to know you based on the things you read about, listen to, or share. They can then move way beyond customization by generating adaptive, personalized experiences that bring the best content on any website or app right to the top. It completely shifts the paradigm from you having to search for information to information searching for you. It’s like having a personal robot who thinks just like you do reach across the Web and return the best music, stories, videos, even daily deals everywhere you go. “Welcome back to ESPN, Amit. The surf report in Venice tomorrow is 3-4 feet, and the Lakers are leading by 10 points at the half.”

All of this paints just a small picture of what’s to come. Imagine the applications in fields like education, health care, or personal finance (wouldn’t you love a robot that does your taxes?). As the Internet starts to work for us, it will enrich our lives in ways we can’t even imagine. I, for one, am very excited that my childhood dream of owning my own robot is finally coming true.

Amit Kapur is the CEO and co-founder of Gravity, a company that makes the Internet adaptive and personalized. He was formerly the COO of Myspace. As an early Myspace employee, he led the development and growth of Myspace Music and Myspace Mobile.

According to sources close to the situation, Demand Media was deep into discussions with a private equity firm to complete a deal that would have taken the online content company private, nearing a price that was double its current value.

But Demand abandoned the effort this past week — which was born from an aggressive attempt by Boston-based Thomas H. Lee Partners to purchase the company for a price of up to $1.2 billion. That was due to a number of challenges, including complications related to its financing and the ability to retain executives in its aftermath.

The move on Demand by private investors is perhaps no surprise, and is part of a wider trend related to some Internet companies whose stocks have a depressed value relative to the worth of their assets.

Among companies having been and also being evaluated by private equity firms, whose business it is to turned the undervalued into a goldmine: Yahoo and AOL.

And also Demand, which is now worth only $605 million, a market cap that is off 65 percent since it went public in February 2011. Shares now trade at $7.25 each.

That depressed share price has been due to a number of issues, most especially changes to Google’s search algorithm to improve results. Called Panda, the changes at the search giant — a critical partner of Demand’s — has cut traffic to its major content sites and also called into question its ability to monetize its scaled editorial efforts.

Such a situation is nearly irresistible to PE firms — in this case, Lee, which approached Demand.

Several sources said that the board threw out a hefty number that it assumed would shut down any interest and the pair began talking with an initial offer to take the company private at $11.28 a share.

That equals close to $1 billion for Demand, which also has more than $100 million in cash. But sources said Lee and Demand also discussed the addition of a large loan as part of the ongoing discussions, for possible acquisitions related to a content roll-up strategy it had, which would bring the total up to $1.2 billion.

One source underscored that the board of the Santa Monica, Calif., company had no interest or intention to sell the business, but that the premium was large enough that it engaged.

The deal from Lee, which also included a strategy of splitting up the content arm from Demand’s lucrative domain-registar business.

There were also large cash-out provisions for major shareholders, as well as for CEO and co-founder Richard Rosenblatt.

Thus, the two sides engaged intensely in the last several weeks in crafting an agreement, although the devil would prove to be in the details.

One big issue is that taking Demand private was still a big financial commitment for Lee — which tried to engage some of its limited partners in the transaction — as well as other investors, including Silicon Valley’s Marc Andreessen.

That proved harder than Lee thought, said sources, with some balking at the firm’s ability to make a big enough score on the possible turnaround.

“It was hoped it would be a Skype situation, but there were worries,” said one source, referring to the blockbuster sale of the Internet telephony company by private investors to Microsoft for $8.5 billion last year. That deal was widely considered a PE home run, given the excessive premium paid for it.

Demand’s challenges increasingly worried the firm as it moved forward, sources said, causing it to reevaluate its earlier bid several times.

Also a worry: Retaining major talent, including Rosenblatt and others, after they sold large chunks of their equity.

After Lee asked for more time to complete the financing, Demand ended the talks last week.

Another source, as is typical in these endings, said it was the Lee that walked away (who knows and, really, who cares — both sides were engaged seriously).

One thing was true: “Demand was definitely at the altar, but it did not get to the vows,” said one source.

Another source noted that the board also determined that Demand’s situation was improving, and that new trends are showing that the bottom might be been reached. The company reports its first-quarter earnings on May 8, which is expected to show some traction related to its many challenges.

“There is nothing Lee could do that Demand could not do for itself,” said one person. “So throwing in the towel seemed premature for now.”

Lee declined to comment, as did Demand.

At Y Combinator’s Demo Day, a short Ark pitch delivered in the midst of 64 other start-up presentations got the company commitments for $2 million in funding in a single day. And more than 250,000 people have signed up for Ark beta invites.

Less than a month after Demo Day, Ark now tells me that it has raised a $4.2 million seed round from investors including Andreessen Horowitz, Charles River Ventures, Greylock Partners, Intel Capital, SV Angel, Atlas Ventures, Crosslink Capital, Expansion Venture Capital, Felicis Ventures, Lightbank, Salesforce, Tencent, Transmedia Capital, and a bunch of individual angel investors.

That’s the largest seed round ever raised by a Y Combinator company. Update: Paul Graham of Y Combinator says the program does not track such statistics, so he cannot confirm that Ark’s is the largest seed round to date. Thus, I’ve updated the headline to “biggest seed round in memory” from “biggest seed round ever.”

The round benchmarks Ark as a clear front-runner in the most recent batch of the program’s closely watched start-ups. (Though to be fair, I’ve heard other top companies in the winter class are also cleaning up.)

Ark is almost too good to be true — a search engine that combines public and personalized search for people. It promises to transcend the current stalemate in social search between Google, Twitter and Facebook.

And it actually is too good to be true — right now, Ark is basically a simple interface to sort Facebook profiles by current city, gender, school, work, interests and other categories. Only 15,000 people have gotten beta access, as Ark has already fully maxed out its Amazon Web Services account by searching their networks and public data.

Ark co-founder and CEO Patrick Riley

But Ark CEO Patrick Riley, who was previously working on his Ph.D. at UC Berkeley’s School of Information, is clear about his ambition. “Google seems so out of touch without the rest of us,” he told me last week. “They’ve lost their neutrality.”

The rift between Google and Facebook leaves social search dramatically underdeveloped, Riley said (and it’s a point I’ve argued, as well).

“Politics have left open this enormous opportunity,” is how Riley put it.

Part of what’s hard about social search is that Facebook prohibits outside crawlers. But Riley said he’s confident that he can get Facebook data, because he has gotten advice from Facebook CTO Bret Taylor, and has worked with Facebook’s legal team to make sure everything’s kosher.

So why should anyone care about “people search”? Beyond the age-old attraction of researching and stalking people, Riley described Ark as an automated “About.me of everyone,” that collates various social profiles.

Riley also said Ark is planning to beef up its social-discovery tools, so users can find new activity and interest partners inside and outside their networks. There will also eventually be an Ark equivalent of Google AdWords, where users can pay to promote themselves, he said.

Riley wants to develop a reputation and validation tool that fingerprints a person by comparing their social graphs on different networks. Because many sites and apps improve with a better sense of who is using them, he plans to provide social-data plug-ins to other companies.

After being founded just last summer and coming into focus during the three-month YC program, Ark already has a team of 16 employees, including co-founder Yiming Liu, also from Berkeley’s iSchool. And now it has a bunch of money to hire more.

Please see the disclosure about Facebook in my ethics statement.

Baidu, which generates almost all its revenue from search advertising, has posted double-digit earnings growth over the past year on soaring ad sales. The company has solidified its market-leading position in China after U.S.-based rival Google Inc. shifted its local search traffic to Hong Kong in 2010 following a disagreement with Chinese officials over online censorship.

Read the rest of this post on the original site »

Except that’s not true at all: The Web offers advertisers a slew of creepily effective targeting mechanisms, but they only work for some stuff, some of the time. An ad on the Web may do a better job of reaching its audience than, say, a magazine ad. But that doesn’t mean it does a good job.

Example: Here’s data from Nielsen, via Bernstein analyst Carlos Kirjner, which tracks the accuracy of a recent ad campaign by “a manufacturer of women’s personal care products.” It was supposed to target women between the ages of 25 and 54. But most often it didn’t — the most accurate publisher got the ads in front of the right people 40 percent of the time. Overall, the campaign only hit the target 25 percent of the time. And nearly half the time — 47 percent — the ads got served to men.

Kirjner uses the anecdote to bolster his bullish case for Facebook, which he thinks can do a much better job of targeting than regular sites can, because it knows so much more about its 800 million-plus users.

Maybe. I’ve noticed that Facebook has stopped sending me ads that offer to get me a job at the CIA, or to meet Christian singles in my area, so that’s good. Right now, it’s showing me a banner for the McDonald’s Angus Deluxe, which is more accurate, since I do like food. But not that food.

The Web’s sorta-close, sorta-not targeting problem hasn’t hampered Google, obviously. But that’s because Google’s search ads respond directly to your input and your intent. Now, Facebook, Google and everyone else are going after the branded ads that dominate TV, where the really big money lives. And if they want to get bigger bites of that, they’re going to have to get more accurate.