Former Facebook exec Owen Van Natta will take the CEO job at a music discovery site called Playlist, a move that had been speculated last week, after he did not end up taking another position as head of MySpace Music.

Van Natta’s arrival at Playlist was not the only news for the Palo Alto, Calif.-based start-up–former AOL exec Bob Pittman’s Pilot Investment Group is also investing an undisclosed amount of money in Playlist. Pittman will also join its board.

Playlist has previously raised several million dollars, said sources, but the new funding is many times that, to total about $18 to $20 million.

The move to Playlist is an interesting one for Van Natta, who has looked at a number of jobs since leaving the high-profile social-networking site earlier this year.

He has talked to a wide range of companies, sources said, including Microsoft (MSFT) and a range of start-ups, as well as with MySpace, which is owned by News Corp. (NWS). (News Corp. also owns this site).

Those talks between Van Natta and MySpace to run its new music initiative did not pan out for a variety of reasons.

But he has long expressed a desire to become a CEO of a company, rather than just head to another executive job within a larger company, so the move to run a start-up is not a surprise.

In an interview this afternoon, Van Natta told me he got very intrigued by the possibilities at Project Playlist, which was the first iteration of the start-up and in which he is an investor, due to its viral growth.

And, indeed, Playlist has grown quickly to become one of the larger music communities on the Web, claiming that more than 38 million music fans monthly, sharing playlists via its Web site and also widely distributed embeddable widgets. The site has tens of millions of daily page views, according to surveys.

To get to those big-scale numbers, Playlist essentially has offered users a giant linking service for music, not unlike Google (GOOG) with all information, pointing users to promotional, free and sometimes illegal music and music video tracks all over the Web.

Those links to illegal music have resulted in a lawsuit aimed at Playlist from the music industry, sources said, a sadly typical experience of many online music services.

The usual tactic for the music giants: Sue first and shake down later.

Under Van Natta, I would guess, Playlist is likely to reach out to music companies and strike deals.

The company also needs to settle on its main business plan, which appears to me to have been less important than its explosive growth.

Playlist currently does have some small amount of advertising on the site, and seems to be making most of its scratch from sending leads to ringtone sellers.

Van Natta did not want to reveal specific strategies for Playlist going forward, only noting the opportunity is large.

“Discovery around music is exploding on the Internet,” said Van Natta. “And the company that does the best job of taking advantage of that is really going to be huge.”

That said, there have been a lot of music-aimed efforts like Playlist in the music space, with a lot of different business plans and varying degrees of success, ranging from the Apple (AAPL) behemoth iTunes site, which sells single songs, to the CBS (CBS) music service, Last.fm, which relies more on advertising revenues.

Other contenders in the space include the Rhapsody subscription service from RealNetworks (RNWK), music discovery service iLike and many others. MySpace has also waded deeply into the music space, and Facebook is also reportedly weighing its own service.

Van Natta was one of Facebook’s earliest and most prominent execs, serving in jobs like COO and also Chief Revenue Officer while there.

He came to Facebook in the fall of 2005, after a stint as VP of Worldwide Business and Corporate Development at Amazon, and was part of the founding team of A9, the Amazon search company.

“I am excited to be building a company again,” said Van Natta, who has taken many months off since he left Facebook in February.

And it could not come a minute too soon.

Yahoo has been unusually quiet about the issue, after weeks of Google’s more aggressive and listen-to-us-big-brains approach (along with some creative fake-blurbing of BoomTown!).

That’s all resulted in more Justice Department scrutiny and more critics piling on, including the typically dulcet Canadians, who might also be launching an antitrust investigation.

Thank goodness, then, that the first foray by Yahoo President Sue Decker (pictured here) makes the case in a much more sensible and straightforward manner, which has been sorely needed on the Yahoogle side.

In her piece on Yahoo’s corporate blog–the inexplicably named Yodel Anecdotal–called “Myth-busting and the Yahoo!-Google Agreement,” Decker’s just-the-facts-ma’am approach is well done.

Writes Decker:

“Here’s the bottom line:
Yahoo! will use this agreement to help us become a stronger competitor in all aspects of online advertising; and Yahoo! is not exiting the sponsored search business. We plan to remain a strong player in sponsored search.”

That said, Decker does take aim at a lot of paper tigers and makes some assertions about the strength of Yahoo’s search business that stats belie.

I have been pretty clear, as have many, that the pair will not fix prices; nor are they merging their businesses in some fashion to create a search behemoth that controls more than 80 percent of the market.

In addition, Decker’s assertion that Yahoo did not do an exclusive deal to avoid the monopoly issue is kind of moot–never ever would the pair have been allowed to strike such an agreement.

Nonetheless, even in this looser partnership, there is reason to be worried.

Most people’s problem, actually, is over whether the No. 1 and No. 2 players in any market should be allowed to partner at all.

And what most are nervous about is what happens if Yahoo (YHOO) becomes too dependent on Google (GOOG) as its search market share declines (and it is declining, to be sure, according to all stats on the subject).

Nonetheless, it is hard not to like Decker’s examples of how Yahoo cannot fill up all search page results with ads, such as a search about the “elevation of Mount Elbert.” (That lovely highest peak in the Rocky Mountains is pictured at left.)

Decker also does not spend a lot of time playing victim to the mean lobbying of Microsoft (MSFT). While she does mention it, she does not dwell on it, as Google has.

And, surprising to me, Decker does clearly admit that Yahoo is doing this deal because advertisers pay more for Google queries than for those on Yahoo.

With some enthusiasm, she also tries to make the case that Yahoo is attempting to change that.

Writes Decker:

“We will implement the agreement in a way that respects an important principle you may know as the Hippocratic Oath: ‘first, do no harm.’ That is, we will not use Google ads in a manner that would create a significant risk to the health of our own sponsored search business.

“It’s important for us to recognize when using Google ads is beneficial for users and advertisers. Queries for which we have no coverage, low depth, and/or low relative monetization are all circumstances in which backfilling probably makes sense–they indicate that Yahoo! is not currently delivering enough value for that inventory. If Google can deliver that value where we currently don’t, then everyone wins–including the advertiser and the consumer.”

I like the idea of backfilling, even if I don’t like the fact that it is the too-powerful Google that is doing this heavy lifting for Yahoo.

But, at the very least, Decker is being honest that Yahoo has come up short and needs help, as it tries to right itself.

Admitting you have a problem, of course, is the first step to recovery. So, let’s hope the cure Yahoo is using–better and more search ads from Google–does not kill it.

Here’s Decker’s whole post on the Yahoogle deal:

Myth-busting and the Yahoo!-Google Agreement
Posted September 26th, 2008 at 12:23 pm by Sue Decker, President

Sue Decker
President