As the Microsoft-Yahoo will-they-won’t-they? saga drags on, Google’s role in any future talks becomes more apparent.

On Thursday Google CEO Eric Schmidt said a two-week trial selling search advertisements on rival Yahoo last month had given the companies good reason to discuss cooperation, but there was no deal yet.

That isn’t great news for some in the online advertising world.  As commentators have pointed out, a Google-Yahoo partnership (Yahoogle? Yoogle? Gahoo?) could concentrate too much power with just one team. This has led to some folk to paint Microsoft as the little guy. Yes, the same Microsoft, which is a Monopoly 101 case study for first-year economics college students.

In a TV interview with CNBC on Friday, WPP CEO Martin Sorrell said, “It was a shame…that those negotiations failed. Maybe they’ll come back again.”

Sorrell, whose empire of ad agencies includes Ogilvy, JWT and Y&R,  said the advertising industry lost a potential balancing influence in the Web search market when the talks between Microsoft and Yahoo collapsed.

Meanwhile,  Silicon Alley Insider reports that Google is seriously considering having display ads on its home page, based on statements from executives. SAI estimates Google could add up to $3 billion to $4 billion in annual revenue if it decided to do so.

 Keep an eye on:

* British video search engine company Blinkx sees it shares fly on rumors of a possible bid by News Corp or Google  (Reuters)

* MySpace lets users share their profiles across the Web (Reuters)

* Real Networks spins off its gaming division (GigaOM)

(Photo: Reuters)

Every so often, poetry blossoms through the doldrums of otherwise stuffy corporate financial conference calls, where imagery and alliteration take a back seat to requests to “drill down” into earnings data.

Asked if their plan to stop paying a dividend masks some ominous inability to pay its debts, Warner Music Group Edgar Bronfman Jr. summoned his inner storyteller to assuage investors fears…

“Given the uncertain economic environment — as we look at what levers do we want to pull as we sail our ship, that no matter what currents run under the water or winds blow above the water, we are going to be nowhere near the shoals or the rocks we don’t anticipate.”

Nice, eh? Soothing even.

Okay, Shakespeare, it aint. But hey, don’t forget, Bronfman has written music performed by the likes of Celine Dion, Barbra Streisand and Dionne Warwick. He may not be able to get Madonna back on his roster, but a co-written hit tune?

Not impossible…

(Photo: Reuters file)

At last, we have found a culprit who is slowly killing newspapers across the United States. Her real name is unknown, but her online identity is daphne3620 and she left the following comment on the Web site of the Minneapolis Star-Tribune:

Now I feel like garbage I read the Star Trib online and don’t subscribe to the actual physical paper. Sorry .. guys! I would gladly pay to use the site here .. give it a thought. I am serious .. I will pay.

This comment was attached to an article posted to the Strib’s Web site on May 6 that revealed that the paper’s owner had to write down 75 percent of the $100 million it paid for its stake. Private equity firm Avista Capital Partners engineered a purchase of the paper from McClatchy Co, which was announced in 2006. Since then, the paper has hemorrhaged revenue, just like many other big-city dailies.

The write-down, taken at the end of 2007, reflects the estimated loss of value and is consistent with the falling stock prices of publicly held newspaper companies such as McClatchy and the New York Times. Avista’s public accountants required the private equity firm to write down or “mark to market” the estimated value of the Star Tribune.

The memo denied a recent report in the New York Post that the Star Tribune may file for bankruptcy.

“The Star Tribune currently has sufficient liquidity and is up to date on all its debt payment obligations,” said the memo, distributed by Avista.

And if this turns out to be wrong, daphne3620 and all her freeloading friends will have to pay a very big price indeed. (Me included.)

(Photo: Reuters)

Digital media and entertainment: it may not help your kids, and it may even make them cry.

A new poll released by Common Sense Media and the Joan Ganz Cooney Center on Thursday showed that U.S. parents agree that digital media skills are important to children’s success in the 21st century, but they were skeptical about whether it contributes to the development of skills like communicating, teamwork and establishing civic responsibility.

Excerpt from the release is here:

“When it comes to digital media in kids’ lives, it’s a confusing time to be a parent,” said Jim Steyer, CEO and founder of Common Sense Media. “Clearly, parents seem to understand that the world has fundamentally changed and that kids need digital media to be successful in the 21st century. But the results also suggest that parents have reservations about how their kids engage with each other using digital media. That’s why it’s important that we help parents understand both the potential and the risks of digital media, so we can make sure kids get the best of this new world.”

The poll included a nationally representative sample of 695 parents, as well as an illustrative sample of 245 teachers, according to the press release.

Among the recommendations:

A national public engagement effort should be mounted to help parents understand that the range of 21st-century skills goes far beyond the “3 Rs” they learned. Parents should be provided with tools and information to help facilitate their comfort, acceptance, and usage of digital media to promote skills that will be essential for their children’s success today.

A somewhat more entertaining study out earlier this week from Consumer Reports WebWatch and the Mediatech Foundation found that many children’s Web site publishers manipulate kids — and even bring them to tears.

Some of the findings:

Web sites frequently tantalize children, presenting enticing options and even threats that their online creations will become inaccessible unless a purchase is made. Some sites show attractive options that invite a click, but lead to a registration form instead. Some sell a child’s prior experience — a room they’ve built for a virtual pet, for instance — back to them, using statements such as, “If you cancel your membership, then your belongings will go into storage and will be automatically retrieved when you re-subscribe.”

The games we observed vary widely in quality, in educational value, and in their developmental match with children’s abilities. Such mismatches often result in frequent cries for help.

“There’s nothing more painful than watching a young child cry,” [study author] Warren Buckleitner said in a press release. “But unfortunately, that’s the end result for too many children who are spending time with ’state-of the-art’ children’s online content.”

For a mogul who’s spent a lifetime snatching up newspapers across the globe — and who spent the better part of his time talking about them on Wednesday’s quarterly earnings conference call — we found it surprising that he insists he’s not spending more money on the dying print business.

Murdoch: “From day one, the financial press has been fixated on portraying this move as a change in strategic direction; the company is now focused on allocating more of its capital on print businesses. That is not our intent, nor is it factually correct. We have not changed our playbook.”

Murdoch argued that Dow Jones, the splashiest of his newspaper buys yet, is barely a newspaper publisher at all. To lay out that argument, Murdoch appears to have abandoned his earlier argument that a free Wall Street Journal online would be better than a subscription-based site.

WSJ.com still has more than 1 million paying subscribers, up 11 percent compared to last year. (It’s unclear if he meant that the site added 11 percent more subscribers compared to the same period last year.)

Then there’s the paper itself, where Murdoch sees big opportunities to boost ad sales and circulation volume and revenue. Individually paid subscriptions rose 1.6 percent to 1.46 million and overall circulation rose 0.3 percent to 2.07 million. Circulation revenue rose 6.8 percent in the quarter, slightly below the 7.3 percent growth in 2007.

Its biggest growth area remains its enterprise division, which houses the Dow Jones Index, Factiva and Newswires — all of them subscription businesses. He says the Dow Jones Indices business revenue rose 37%, with profits up nearly 50% in the quarter ended March 31st. Factiva revenue grew 10 percent.

Dow Jones’s financial information and services group revenue rose 13% , with profits up over 8%.

All this in the first quarter after the purchase! Then again, maybe Murdoch thinks some people have set the bar higher than that.

This is destined to be an extra-inning game; to use an overly used metaphor, we’re only in the first innings. Those of you expecting to see immediate dramatic results in 12 weeks are kidding yourselves and setting an unrealistic bar. Over time, as we have done dozens of times at News Corp, most recently with SKY Italia and MySpace, we’ve made our acquisitions work, generating great returns to our shareholders. We’ll do it again at Dow Jones. It may take time, but I am as confident of it as any acquisition I have done.

Then there’s his Newsday bid, which was one of the more exciting parts of the conference call. Boxed in by Newsday reporters on the call, Murdoch spoke frankly about his confidence in landing the Long Island daily.

No, I don’t think Cablevision will prevail. Just be patient for a couple of days (inaudible). We’re certainly not in the business of getting into an auction here …

We’re hoping to wrap it up within the next week. And I don’t mean the end of next week, I mean within the next seven days … It takes two to agree. But we’re at a pretty advanced stage. I’ll just leave it at that at the moment.

Nope. No newspapers here.

(Photo: Reuters/David Moir / News Corp. Chairman and CEO Murdoch stands with Scotland’s First Minister Salmond during the official opening of the News International press printing plant at Eurocentral near Glasgow in central Scotland.)

MediaFile wrote last week about Steve Ballmer’s world tour to promote Microsoft’s unsolicited takeover bid for Yahoo. Now that the Microsoft has walked away and the odds for Microhoo aren’t looking so hot, Microsoft execs have fanned out across the globe to explain the company’s decision. To Skhirat, Morocco, San Donato Milanese, Italy and Louvain-la-Neuve, Belgium, we can now add Seoul, London and Jakarta.

Let’s put them up on the big board!

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And it was thus decreed that the messengers of Steve Ballmer were sent far across the land to say No to an alliance with the kingdom of Yahoo:
    
“Yahoo could always come back again and say please buy us for $33 (a share) and I’m sure we might reconsider it, but we’re not assuming that’s going to happen,” Microsoft Chief Research and Strategy Office Craig Mundie to Reuters in Jakarta, May 8. 

“The conclusion was reached that we should pursue our independent path,” Microsoft Chairman Bill Gates in Tokyo, May 7.    
    
“The key decisions on that will be made by Microsoft CEO Steve Ballmer, who took a look at Yahoo and decided that, on our own, he likes the stuff that we’re doing,” Gates in Seoul, May 6.

“We decided to move on and basically withdraw our offer …. Absolutely, that’s the end of the story. We are moving on because our strategy is very clear,” Microsoft International President Jean-Philippe Courtois to Reuters in London, May 6.

The globe-trotting Microsoft messengers have yet to fully convince Yahoo shareholders of their sincerity, since investors have propped the stock up to nearly $26 despite the break-up of talks over the weekend. That’s well below Microsoft’s last offer for $33 per share, but still perched higher than the $19-level, where Yahoo traded before the takeover offer was made public on Feb. 1.

Maybe shareholders are mindful of Microsoft’s last world tour in April, when Ballmer hopscotched through Morocco, Italy and Belgium saying there was no way he would raise his initial offer of $31 for Yahoo. Two weeks, and two dollars per share later, Yahoo is still waiting.

Keep an eye on:

* Rupert Murdoch says News Corp is feeling the squeeze on advertising budgets due to a weakened U.S. economy; the company’s division that includes MySpace will likely miss a $1 billion annual revenue goal by 10 percent. (Reuters)

* Warner Music Group’s quarterly loss comes in worse than expected and the company suspends its dividend to raise cash and cut debt. (Reuters)

* NBC Universal is starting a 24-hour local news network in New York, in what could be the first of several such channels around the country, to help weather a weak local TV advertising market. (WSJ)
 
Photo: Reuters

What makes Norman Pearlstine cranky? Not getting his daily fix of media website paidContent.org.

The Carlyle Group advisor and former Time Inc. editor-in-chief, was lobbed a question about what he feels crucial to read every day,  after speaking at the Argyle Executive Forum Leadership in Media conference in New York.

"I must say that the one thing I've got very cranky if I don't get is Rafat Ali's
paidContent.org," Pearlstine said, referring to the website started by Ali in 2002. "I think he does, with a relatively small staff, a remarkable job of pulling together coverage of what's going on in new media and a fair amount of traditional media. If there's one thing every day I look for that's it."  

That doesn't mean newspapers are done for though -- although they won't generate the margins they used to before the rise of the Internet, Pearlstine said during the conference.

"With the very quick development of the Net, newspaper margins really just went south very quickly," he said. "They remain viable businesses, they remain capable of generating consistent cashflow, but they are not going to have the kinds of margins again that they've had in the past. "

Presumably that's because Pearlstine can't take his eyes off paidContent...

(Photo: Reuters)

That was fast. Already, in its first week, Grand Theft Auto IV sold more than 6 million copies globally, rocketing past expectations that were hardly modest to begin with.

So what is it with this game? Well, for one thing, it has been praised by gamers and critics alike who hail it as satirical and multi-layered, the equal of films like “The Godfather” or TV shows like “The Sopranos.”

Made by Take-Two Interactive Software’’s Rockstar studio, the game also has its share of detractors, who say it’s too violent and sends the wrong message to kids and young adults. Given the big sales the first week, the criticism doesn’t appear to have hurt its popularity.

But the real question is what does more than $500 million of first week sales of GTA IV mean for Take-Two?

Silicon Alley Insider says this: “Take-Two management has long argued that Wall Street didn’t understand what a hit GTAIV would be. When they did, the argument held, they’d bid the shares up. Time to find out. ”

And the Wall Street Journal points out, “Depending on how the sales figures impact shares of Take-Two, they could strengthen the company’s argument that videogames rival Electronic Arts Inc. needs to raise its unsolicited bid for Take-Two above $2 billion. EA has launched a hostile tender offer of $25.74 for Take-Two shares, which Take-Two has rejected as too low.”

Keep an eye on:

• Cablevision Systems will acquire Sundance Channel from General Electric Co’s NBC Universal, CBS Corp’s Showtime Networks and entities controlled by Hollywood actor and director Robert Redford.
• Clearwire Corp and Sprint Nextel Corp plan to combine their next-generation wireless broadband businesses to form a new $14.5 billion communications company (Reuters)
• Major studios and the Screen Actors Guild broke off three weeks of contract talks without agreement, stoking fears of renewed Hollywood labor unrest after a 100-day writers strike that ended in February (Reuters)
• Five years have passed since the Jayson Blair scandal shook the New York Times and the media world. MarketWatch’s Jon Friedman takes a look at how media organizations have fared in trying protect themselves from a similar situation (MarketWatch).

(Photo: Reuters)

The “Business Call to Action,” hosted by the British prime minister, drew some 80 CEOs of the world’s biggest companies including Microsoft, Coca-Cola and Vodafone as well as top politicians to discuss how big business can stamp out global poverty.

The lure? Big profits. Ghana’s President John Kufuor said it will be easier for U.S. and European businesses to make their next million in Africa rather than anywhere else. The credit crunch has made a few more believe this might be true.

“Three billion of the world’s 6 billion people have mobile phones,” Vodafone CEO Arun Sarin said. “And three-quarters of the new customers are in the developing world. This is a huge opportunity.”

Two companies laid out how they were using technology to tackle issues unique to developing nations in a race to win market share. British telecom company Vodafone has made some headway, while Telefonica O2 is launching new products to allow migrant workers to send money home using their mobiles.

Vodafone CEO Sarin:

• Vodafone already has 2 million Kenyan and Tanzanian customers, out of 10 million in total, signed up to M-PESA, which allows customers to send much-needed money to loved ones using their mobile phones.
• The company operates in Afghanistan. To get around the problem of illiteracy, the firm has developed voice recognition software. Luckily you don’t have to shout out your bank details or the amount you’re sending - you give voice instructions and plug in the numbers.

O2 CEO Matthew Key:

• Telefonica has plans to for a similar service in Latin America, where many leave for the United States and send part of their wages home.
• Telefonica wants 200 million people to sign up for “a new suite of banking products,” Key said.
• The company estimates there are 650 million money transfers back to Latin America each year, and its mobile phone products will slash the average $10 cost per transfer.

–Reporting by Chris Wills in London