Fred Wilson Talks Yahoo, Tumblr, NSA Spying and the Secret to Twitter’s Success.

Click here to see a video of my interview with venture capitalist and Twitter investor Fred Wilson from Flurry’s SourceDigital13 conference.

Or watch it here:

Reinventing Print Media: IDG’s Online Ad Network Gets its Mojo Going

Everyone knows the print media is in a world of hurt. The more difficult question is this: What do publishers do about it?

Technology publishing giant IDG just may have come up with one killer idea. And no, the answer does not involve scantily clad women or slide shows touting the best nude beaches.

For IDG, the publishers of hundreds of magazines such as PC World and Macworld, the answer was to go against one of the industry’s most sacred notions and create its own online advertising network–with a major twist. Instead of only selling ads for its own properties, IDG would take advantage of the media’s fragmentation and the shift to online advertising by selling ads for other new media properties. In addition, the network also helps IDG Web sites to grow their audience by syndicating their content across the Web to non-IDG properties. (BusinessWeek, for example, syndicates IDG content on its Web site.)

It’s a bold strategy that seems to be paying off. Peter Longo, CEO of IDG Syndication and Networks, says that its network is currently serving ads to a combined total 75 million unique monthly readers, up from 20 million 18 months ago when it launched the group. Currently, IDG works with about 200 Web sites, including GigaOm, Slashgear, and Xconomy.com. All told, those sites serve up nearly 750 million ad impressions per month. Revenue is forecast to grow 100% this year, says Longo. 20 syndication partners have signed on to the program as well.

Check out the rest of the post on BusinessWeek’s TechBeat.

Facebook Reaps Recruits at High Levels

Facebook Reaps Recruits at High Levels
Boosting hiring amid a job slump, Facebook snares Yahoo!’s security chief, an open-source guru from Six Apart, and talent from Genentech and Google

By Spencer E. Ante

So much for cutting back during the downturn.

As Facebook ramps up hiring from about 1,000 employees today to as many as 1,200 by the end of the year, the social networking giant is recruiting technical and business leaders from some of the best-known firms in Silicon Valley to help accelerate its financial performance.

Among the new hires at Facebook are Arturo Bejar, who will soon join as a director of engineering from Yahoo! (YHOO), and David Recordon, an open-source software expert from blogging software maker Six Apart, BusinessWeek.com has learned.

Bejar led Yahoo’s security team, and Recordon was one of the developers of the OpenID authentication software, according to Facebook. Other new hires include former Genentech (DNA) chief financial officer David Ebersman, now doing the same job at Facebook, and Greg Badros, a senior engineer from Google (GOOG) and now an engineering director at Facebook.

Read the rest of my BusinessWeek story here.

New Sheriff in Town: Exclusive with Obama Trustbuster Christine Varney

Check out my BusinessWeek story, based on the first extensive interview with the Obama Administration’s new head of antitrust enforcement, Christine A. Varney. Techies haven’t quite come to grips with the fact that there are new sheriffs in town. Big changes are coming with the way this and other industries are regulated, as you can see with the reaction to the Microsoft-Yahoo search deal and the FCC action on Apple. Read on.

The Antitrust Cop and the Tech Industry
Christine Varney aims to reinvigorate antitrust policy without stifling U.S. business, but Google and Intel could be among her targets

By Spencer E. Ante

Christine A. Varney, the nation’s top antitrust cop, is trying to pull off a delicate balancing act. She wants to reinvigorate antitrust policy after the laissez-faire years of the Bush Administration. Yet she also wants to avoid interfering with companies that compete vigorously but fairly. “This job is making sure the competitive marketplace is free from obstacles and barriers,” says Varney, whose official title is Assistant Attorney General at the Justice Dept. “We are thinking a lot about where bottlenecks might be in certain industries. If we can break through them it would be good for consumers.”

In her first extensive interview since taking office in April, Varney described an antitrust philosophy that is clearly more aggressive than in the recent past yet also less ideological than many businesspeople may expect. Varney says her goal is to bring antitrust law back to its historical center, not simply to go after giants because of their size. “We are not anti-big in any way, shape, or form,” says Varney, a former Federal Trade Commissioner who spent the past 12 years representing corporations as a partner at the Washington law firm Hogan & Hartson. “But with enormous success comes responsibility.”

Varney says the Justice Dept. will be taking a look at a range of industries including transportation and technology. Antitrust officials have also opened inquiries in agriculture, financial services, telecom, and health care, say sources familiar with the Justice Dept.’s activities.

Check out the rest of the story here.

Microsoft-Yahoo: Antitrust Hurdles Loom

The Microsoft-Yahoo search deal is no slam dunk, when it comes to antitrust matters. Check out my BusinessWeek story, out this morning.

Microsoft-Yahoo: Antitrust Hurdles Loom
The weak Web search-ad companies want to team up against No. 1 Google, but regulatory tradition and practice have long blocked such deals
By Spencer E. Ante

Don’t expect the Microsoft-Yahoo search deal to sail through a regulatory review. Sure, it’s tempting to think Justice Dept. officials won’t quibble much over a deal aimed at helping two struggling companies get a leg up against a market-leading competitor. That’s essentially the line taken by executives at Microsoft (MSFT) and Yahoo! (YHOO) to explain why their 10-year pact shouldn’t be held up by an antitrust review.

But legal experts say the deal is no slam dunk—especially with a new team of regulators in Washington eager to flex their antitrust muscles. Some lawyers and former regulators say the deal may even be quashed, or at least be subjected to revisions, before getting a green light. “Microsoft and Yahoo have a tough battle on their hands with the antitrust regulators,” says David Balto, former policy director of the Bureau of Competition at the Federal Trade Commission under the Clinton Administration. “We don’t want markets to become concentrated. It is like prescribing ice cream for someone who is overweight.”

The agreement is also likely to draw attention from European Union regulators who in recent years have been more aggressive than their U.S. counterparts in scrutinizing mergers and joint ventures. Google (GOOG) is the largest player in the search-ad market, with a 65% share. Together, Yahoo and Microsoft have about 28% of the market.

Under the pact outlined on July 29, Microsoft will provide the underlying search technology on Yahoo’s Web sites while Yahoo will take exclusive charge of search-related ads for both companies.

WALL STREET SEES “MATERIAL RISK”
Some legislators didn’t wait long before threatening to examine the deal closely. Senator Herbert Kohl (D-Wis.), who chairs the Senate antitrust subcommittee, said that the deal “warrants our careful scrutiny,” in a July 29 statement. “Our subcommittee is concerned about competition issues in these markets because of the potentially far-reaching consequences for consumers and advertisers and our concern about dampening the innovation we have come to expect from a competitive high-tech industry.”

Some Wall Street analysts are also sounding alarm bells. “We believe government approval is doable, but we continue to believe there is a material risk that the deal would be blocked or conditioned,” wrote Rebecca Arbogast, analyst with Stifel, Nicolaus (SF).

Microsoft and Yahoo are up against decades of antitrust policy and law that have rarely if ever allowed combinations of the No. 2 and No. 3 players in a given market. To win approval the companies will need to prove that eliminating one top player in the search-ad market will enhance competition and thereby benefit consumers and innovation. “The obvious fear of the antitrust guys is that instead of strengthening the runner-up, it reduces competition between No. 2 and No. 3, and that lessens competition,” says Lawrence J. White, a professor of economics at New York University who served as director of the Economic Policy Office of the Justice Dept.’s Antitrust Div.

Read the rest of the BusinessWeek story here, along with a video of me discussing the story with Peter Elstrom.

Michael Moritz: Lessons from a Long-Ball Hitter

Yesterday, BusinessWeek published my profile/Q&A with venture capitalist Michael Moritz. The news cycle is insane these days, so I am reposting the top of the piece here as well as a link to the rest of the interview. Plus, Moritz doesn’t give many interviews, so it’s worth spreading the thoughts of perhaps Silicon Valley’s most successful investor.

Michael Moritz: Lessons from a Long-Ball Hitter
The journalist-turned-venture capitalist was early to ring the alarm bells about the weakening economy, but he remains optimistic

In 1984 a young British journalist named Michael Moritz wrote a short piece in Time magazine about the legendary venture capitalist Arthur Rock with the title “The Best Long-Ball Hitter Around.”” Today, the 54-year-old Moritz is the guy who swats investing home runs as a partner with the Silicon Valley venture capital firm Sequoia Capital. Moritz joined the firm in 1986 after leaving Time (TWX) and writing a book about Apple (AAPL), The Little Kingdom: the Private Story of Apple Computer.

The deal that made Moritz’s reputation as one of the top venture capitalists in the business came in 1999. That year he pushed Sequoia to make a $25 million co-investment with Kleiner Perkins in a little search company called Google (GOOG). When Google went public five years later in 2004, Sequoia’s $12.5 million investment was worth just over $2 billion—160 times its original bet. Before then, Moritz had put himself on the map with investments in Yahoo (YHOO), eToys, and Flextronics (FLEX), among other successful Web startups. Since the Google deal, Moritz has maintained his slugging percentage, scoring another big win with his investment in PayPal, which eBay (EBAY) bought in 2002 for $1.5 billion.

Moritz typically shuns publicity. But in early February I met him at his office on Sand Hill Road, in the last office park on the lane that serves as home to the kingpins of venture capital. A secretary ushered me into a conference room, but when Moritz showed up he invited me to sit in his office.

Efficiency, Even While Eating
Moritz wore the standard business casual uniform of the Valley: striped dress shirt and slacks, with a sport coat hanging on the wall. He has a small and simple office, with a desk and a table with a few chairs, and a window overlooking the woods. An old and weathered notebook case rested on the table. On his desk sat an Apple (AAPL) iMac computer, an Apple laptop, and a BlackBerry (RIMM), all plugged into the wall. Having visited China seven times last year, Moritz needs to recharge his batteries when he returns to the Valley.

When reporters interview people over lunch, they often can’t find enough time to eat. But Moritz was extremely efficient, downing a fruit plate and Cobb salad, even while picking out the eggs and bacon to set them to the side of the plate. As we discussed the history of Sequoia Capital, the state of Silicon Valley, and the future of investing, Moritz would stab a fork into a group of berries, stick them into his mouth, and gaze off into the distance, before offering up some quip or bit of insight.

Moritz’s presence belies his firm’s reputation for toughness. While Sequoia has made many bold bets over its 36-year history, it has also gained a reputation in some quarters for walking away from portfolio companies that fail to perform. As one head of an investment firm that invests in venture firms put it: “They take the portfolio out back and shoot it. They stop funding companies quickly if they are not working.” Moritz calls the criticism “unfounded” and says there are several instances when Sequoia and its startups “soldiered forward together when times were very bleak.”

Pivotal PowerPoint Presentation
Sequoia’s hard-nosed nature was accidentally put on display last year when Moritz’s firm put together a PowerPoint presentation detailing the coming economic downturn in stark terms. The 56-slide presentation advised companies to cut costs and become cash-flow-positive more quickly in order to avoid falling into a death spiral. Although the presentation leaked out on the Web, Moritz swears the leak was not intentional. “A couple of the CEOs asked us to send them the presentation to help them convince their management teams that this was the deal,” says Moritz. “It was not a cynical attempt to spread the Sequoia name.”

Even though Sequoia was early to ring the alarm bells about the weakening economy, Moritz says he remains optimistic. He is particularly excited about two recent investments he led. One was in digital camcorder maker Pure Digital Technologies, which he claims is the world’s leading maker of digital camcorders, having shipped 1.5 million units last year. He is also bullish about another investment in Green Dot, which he says is a leader in prepaid credit cards. And contrary to word on the street, Moritz says Sequoia still invests in young seed-stage companies from time to time.

The day I met him, in fact, he said he was talking to a 20-year-old about investing $500,000 in an embryonic idea. (He wouldn’t discuss the venture in detail.) “It’s as easy for me to be excited today by the unknown 23-year-olds as I was in the past,” he says. “Those sorts of encounters lift your spirits in imagining what is possible.”

Here’s an edited version of my interview with Moritz:

Can great companies be built in bad times?
Some of that is true. In bitter and cold times only the brave are going to venture out into the cold and the lily-livered posers are going to stay tucked into their bed clothes. It makes life easier for us. The people we are meeting are the genuine article as opposed to the pretenders. The only people who venture out are on a mission, which is what you need.

Click here to read the rest of the interview.

Who Should Lead Yahoo? Answer: Nobody

Well, no one can say they didn’t see it coming. Jerry Yang is finally out at Yahoo, reports Kara Swisher with the big scoop.

And no one can say he didn’t deserve it. Yang, having spurned Microsoft’s rich takeover offer, bet the farm on a search engine deal with Google. And when Google pulled the plug on the partnership, after government regulators wanted to attach too many conditions to it, the search giant effectively ended the reign of Yang.

Under Yang, Yahoo lost $28 billion in value, as of today’s closing stock price, and hundreds if not thousands of of highly talented people left the Web pioneer. (Sorry, Jerry, I have enormous respect for your accomplishments but the company is not “stronger in many ways than it was just 18 months ago,” as you claimed in your goodbye memo.)

So what happens to Yahoo now? The company announced that it has hired executive recruiter Heidrick & Struggles to conduct a new CEO search.

But I think a strong argument could be made that NO ONE SHOULD LEAD YAHOO! In other words, shareholder return would be maximized if the board entered into serious negotiations to sell the company to Microsoft, if Microsoft still wants to buy Yahoo. And why wouldn’t it?

I’ve always said that the biggest impediment to Yahoo’s sale to Microsoft was Jerry Yang. I still believe to this day, as do many folks in Silicon Valley, that Yang never wanted to sell the company to Microsoft. I also believe that as long as Yang was at the helm, Microsoft CEO Steve Ballmer would never re-enter negotiations with Yahoo!

Now, with the incalcitrant founder out of the way, Ballmer has an opening to take another run at the company.

I realize this is an unusual suggestion. Some folks will argue that Yahoo could increase its value by hiring an outside CEO who could set a fresh course for the embattled giant. But I think the chances of a turnaround are very low, given the strength of Google, the hobbled state of the company, and the weakening economy.

A year from now, Yahoo shares could very well be worth half as much as they are today.

I imagine the Yahoo board could engineer a deal for $17 a share–a 60% premium to today’s close. Meanwhile, MSFT shareholders get YHOO at a 50% discount to the rumored $34 bid this summer.

If Microsoft does not want to buy Yahoo, then I say good luck to the CEO bold enough or crazy enough to take on this job. Whoever it is, the board is probably going to have to throw a lot of money at the person to convince them to take on these headaches.

One way to make the job more appealing would be to take Yahoo private. If the debt markets reopened, Yahoo would make an intriguing buyout candidate in many ways. Sure, it would be a risky deal, but if you took the company out of of the harsh glare of the public market, it could possibly buy Yahoo more time and freedom to dig itself out of this deep hole.

What the Failure of the Yahoo-Google Deal Means

So the Google-Yahoo search deal finally fell apart. It’s not terribly surprising. From the beginning, I said that this deal was very problematic, probably anti-competitive, and would raise the ire of government regulators.

Google read the handwriting on the wall and realized the deal no longer made sense. So it pulled the plug this morning.

Yahoo! is clearly the big loser here. They don’t get hundreds of millions in additional revenue that the deal would have generated. Once again they do not have a strategy for turning around the company. And with the economy getting worse, the online display ad market is likely to deteriorate for at least a few quarters, and it may even see negative growth.

“Time is not on their side,” says Dave Morgan, the former chairman and CEO of Tacoda, an online ad network that was sold to AOL in September of 2007 for a reported $275 million. “The longer they wait the worse their numbers get.”

So why is Yahoo’s stock up 6% when the stock market is down 3% today?

Clearly, the market thinks that the failure of the Google deal means that Yahoo is takeover bait again. Problem is, they are running out of dance partners. “It’s a game of musical chairs and the music is stopping and there are not many chairs left,” says Morgan, who left AOL in March.

Google can’t acquire them. Microsoft is probably leery of re-engaging with Yahoo as long as Jerry Yang is running the show. That leaves AOL. It wouldn’t be a merger of strength but it may be Yahoo’s only option at this point–unless the board boots Jerry and invites Microsoft back to the table.

And who wins? Microsoft is the big winner here. Either it gets to buy Yahoo on the cheap, or it can steal market share from Yahoo while the company continues to flail and dither.

“All of this stuff creates an extraordinary distraction for people who buy and sell advertising,” says Morgan. “Who wants to cut a big deal with Yahoo if they have to unwind it a few months from now?

Questioning the Google-Yahoo Search Deal

BusinessWeek technology reporters Spencer Ante, Heather Green, Arik Hesseldahl and Catherine Holahan talk about new iPods and the health of Steve Jobs, the latest BlackBerry Pearl, and the Google-Yahoo antitrust investigation.

Check out the video here.

Also, today Joe Nocera from the New York Times devoted his column to questioning the Google-Yahoo search deal by focusing on the tale of Internet entrepreneur Dan Savage. Nocera was right in zeroing in on Google’s ability to set a price floor for search engine keywords. Determining whether or not this price-setting ability can have anti-competitive effects is likely to be a central question of the DoJ’s analysis, as BW’s Catherine Holahan points out in our Dish segment.

IBM, eBay, Google: Tech Earnings Season Preview (Plus the iPhone App Store)

In this week’s broadcast of the Digital Dish, the BW tech team talks about Microsoft’s support for Carl Icahn’s moves to oust the board at Yahoo and revive takeover talks. Plus, the upcoming earnings season, and of course, the iPhone.

Check out the video here.