Despite tough advertising market, Facebook is expanding

SAN FRANCISCO - Facebook Inc. has plenty of money to overcome the economic slump and is adding new forms of interactive advertising that will boost sales 70 percent this year, Sheryl Sandberg, the chief operating officer, said.

"We could not be doing better financially," Sandberg said in an interview last week. "We absolutely do not need to take money. We might take money - but it doesn't mean we need to."

Facebook is expanding amid the worst market for Internet advertising since the dot-com bust, and at a time when companies are still trying to figure out how to advertise on social-networking sites. While Facebook was "nervous" following the collapse of Lehman Brothers Holdings Inc. last year, its confidence for ad sales "grows every week," Sandberg said.

"We're on a path, a clear path, to be cash-flow positive next year," said Sandberg, who joined Facebook from Google Inc. last year. She had previously served as chief of staff for the Treasury Department under President Bill Clinton.

The challenge for Facebook, the most popular social-networking site, is that people aren't used to seeing ads on its pages, said Allen Weiner, an analyst at Gartner Inc. in Scottsdale, Ariz.

"It's a very, very tough and discriminating audience," Weiner said. "I also don't think they've totally sold the vast array of potential advertisers and marketers on the value of Facebook."

Founded in 2004, Facebook has raised more than $400 million in equity funding, including a $240 million investment from Microsoft Corp. Peter Thiel's Founders Fund and venture capital firms Accel Partners, Greylock Partners, and Meritech Capital Partners are among Facebook's other investors.

Although Facebook doesn't need more money, the company uses lease-financing for equipment purchases, Sandberg said.

Sandberg, 39, said the company has improved its advertising offerings in the past year so they more closely resemble how the site works. In February, Honda Motor Co. allowed users to exchange heart-shaped virtual gifts - complete with a Honda logo - around Valentine's Day. Four days after the campaign started, 1.5 million people had either given or received virtual gifts that promoted the Honda Fit.

"It raised awareness about the Honda Fit by bringing new fans to the Honda Fit fan page" on Facebook, said Chris Martin, a spokesman for the Tokyo-based automaker.

Facebook is also using information on users' profile pages to target ads, Tim Kendall, the company's director of monetization, said at a conference in San Francisco last week. Facebook helped an Asian airline promote airfares by identifying people who expressed an interest in Japan in their profile pages, he said.

Sandberg said Facebook is experimenting with targeting ads based on information on users' virtual walls - without revealing any personal data.

Clients are spending more on Facebook than they did before the financial crisis, which contrasts with industrywide declines reported by Yahoo Inc. and Microsoft, said Jordan Bitterman, a media buyer at Digitas, an online ad agency in New York.

Some companies have held off buying ads on Facebook because they worry about their brands being displayed next to pictures of scantily clad women or other questionable content, said Gaston Legorburu, chief creative officer at Boston-based Sapient Corp., which provides online advertising services to clients such as Coca-Cola Co.

"I still see a lot of hesitation from big brands to take that risk," Legorburu said. "They are still very shy around buying media next to user-generated content."

Sandberg said the increase in visitors to Facebook, as well as the site's growing popularity with older visitors, give advertisers more potential customers.

Facebook reached 200 million users this month, double the number from August last year. Much of the growth is coming from people ages 35 to 49. They accounted for about 34 percent of Facebook's US users in March, up from 27 percent a year earlier, according to researcher Nielsen Online. The percentage of users ages 18 to 24 was 7.6 percent, down from 17 percent a year earlier.

Facebook had 69.2 million US users in March, compared with 55.9 million for MySpace, its closest competitor.

One indication that 2009 is an important year: Mark Zuckerberg, the company's 24-year-old founder, has committed to wearing a tie every day to the office.

"This was a year where we were really, I think, going to have to execute," Sandberg said.

[the article was originally published at http://www.boston.com/business/articles/2009/04/29/despite_tough_advertising_market_facebook_is_expanding]

Microsoft Sales Fall Way to Short

Microsoft (MSFT) posted its first year-over-year sales decline in its 23 years as a public company Thursday, highlighting the tech sector's challenges as the recession drags on.

The Redmond, Wash., software giant missed Wall Street's third-quarter sales forecast by a wide margin, but met expectations on earnings, excluding one-time charges.

For the quarter that ended March 31, Microsoft earned 39 cents a share, excluding charges totaling 6 cents a share related to layoffs and money-losing investments. That was 17% below the same period last year, its second straight dip in year-over-year earnings per share.

Sales fell 6% to $13.65 billion, well below the $14.09 billion estimate of analysts polled by Thomson Reuters. It marked a historic low for the company. Since going public in 1986, Microsoft had never reported a year-to-year drop in quarterly sales.

"While market conditions remained weak during the quarter, I was pleased with the organization's ability to offset revenue pressures with the swift implementation of cost-savings initiatives," Microsoft Chief Financial Officer Chris Liddell said in a statement.

Though Microsoft did not provide specific financial guidance, Liddell said company officials "expect the weakness to continue through at least the next quarter."

Microsoft shares rose 4% in after-hours trading following the earnings release. During regular session trading, shares rose 0.75% to 18.92.

Investors were likely encouraged that the company preserved EPS through cost-cutting, says Jeff Gaggin, enterprise software analyst at Avian Securities.

Investors also may be enthused about the upcoming release of Windows 7, the company's next-generation PC operating system, Gaggin says. Microsoft said it remains on track to release Windows 7 in fiscal year 2010, which ends in June next year.

"Microsoft had a fairly weak first (calendar) quarter, but I don't think anyone was expecting anything differently," said Toan Tran, an analyst with Morningstar. "What investors are going to focus on now is the upcoming release of Windows 7 and how that might get the Windows business back on track."

The current version of Windows, called Vista, is a "damaged brand," Tran said. Critics have called the software slow, bloated and subject to annoying security alerts. Many PC users have avoided upgrading to Vista and continue to use its predecessor, Windows XP.

Microsoft felt the effects last quarter of the personal computer sales slowdown and corporate tech- spending cutbacks.

Analysts are forecasting year-over-year declines in sales and earnings per share for the next two quarters as well.

[the article was originally published at http://www.investors.com/NewsAndAnalysis/Article.aspx?id=474927]

Yahoo Posts 78% Profit dip, job cuts again

Yahoo Inc. posted a 78% quarterly profit decline as the recession hit its slumping advertising business and the Internet company said it would eliminate about 675 more jobs, or 5% of its work force.

The Sunnyvale, Calif., company was hurt across the board as companies scaled back their marketing budgets and flocked to cheaper alternatives. In particular, search-ad revenue, which had been a bright spot for Yahoo, declined 3% after several quarters of double-digit growth.

The results did little to alleviate the pressure on Chief Executive Carol Bartz to make big changes at Yahoo. While she has cut costs, Ms. Bartz is still working through strategic options, including possible sales of business units and a search-ad pact with Microsoft Corp. Yahoo executives declined Tuesday to discuss any talks with Microsoft.

Yahoo's display-ad business, which historically has been fed by spending from major brands such as car companies and telecommunications providers, dropped more quickly during the quarter. Revenue from display ads on sites Yahoo owns, such as Yahoo Finance and Yahoo Mail fell 13%, compared with a 2% decline in the fourth quarter.

Ms. Bartz, who joined Yahoo two weeks into the quarter, said the company was being pressured by the economy but that "brand advertising will grow in an economic recovery," allowing Yahoo to "take meaningful share." She said that some companies, such as non-U.S. auto makers, have increased their spending with Yahoo.

Overall, Yahoo's revenue fell 13% in the first quarter to $1.58 billion, from $1.81 billion a year earlier. Net income declined to $118 million, or eight cents a share, from $537 million, or 37 cents a share, in the 2008 first quarter, when Yahoo recorded a $401 million noncash gain.

Yahoo and Microsoft are still discussing an agreement that would enable the two companies to combine search-ad assets, with Microsoft taking over the business of selling search ads on Yahoo pages, people familiar with the matter said. But no deal appears imminent, said a person familiar with the situation, adding that it appears both sides "are still talking conceptually."

Yahoo Chief Financial Officer Blake Jorgensen in an interview said he was pleased with the company's quarterly results given the "headwind in the economy."

He added that Yahoo would continue to pay close attention to costs, beyond the fresh layoffs. The company laid off roughly 1,500 employees in December and about 1,000 people in the first quarter of 2008.

Ms. Bartz said the latest cuts would be targeted at certain businesses rather than across the board. She added that the cuts were designed to give Yahoo "flexibility to accelerate hiring in other areas" and said she is continuing to focus resources on larger products that are performing well, such as Yahoo Mail.

Shares of Yahoo, which reported earnings after the market's close, rose 3.8% in after-hours trading to $14.92, after rising 5.3% to $14.38 in 4 p.m. Nasdaq composite trading.

[the article was originally published at http://online.wsj.com/article/SB124034487471340099.html]

Microsoft: The Internet Needs More Trust for growth

The Internet needs to be more trustworthy if it wants to grow, according to Microsoft's senior security executive, Scott Charney.

In a video posted to Microsoft's Web site ahead of Charney's keynote at next week's RSA security conference, Microsoft's Corporate Vice President of Trustworthy Computing described how anonymity on the Internet is increasingly being exploited by cyber criminals. "We need to push back on anonymity and lack of traceability," he said.

"Because the Internet can be anonymous and untraceable, criminals flock to the Internet," Charney explained. "Today too many people do not know what software is running on their machine and often they have malware. They often don't know who they're communicating with, whether an e-mail they've received is spoofed or from some unknown sender even when it appears to come from someone they know. When they visit Web sites, they don't know if that Web site is to be trusted or not."

"For all of these reasons we need End-to-End Trust," Charney said.

End-to-End Trust is a security marketing initiative introduced by Microsoft Chief Research and Strategy Officer Craig Mundie at last year's RSA conference. Keynoting next Tuesday, Charney is expected to give an update on the initiative, which the company has thusfar billed as an effort to engage industry, consumers and policy makers in a serious discussion of online security problems. His video was posted this week on a revamped version of Microsoft's End-to-End Trust Web site.

As the world's dominant supplier of software, Microsoft is constantly in the crosshairs of attackers. Even as the company has taken steps to lock down its flagship Windows operating system, hackers have exploited countless flaws in the programs that run on top of it, such as Office and Internet Explorer.

Microsoft would like to give its users a better idea of whether a Web site or e-mail attachment is trustworthy. But how you identify people on the Internet without raising serious privacy concerns? It's a problem that Microsoft hopes to solve first by engaging in discussion.

"We've been talking about this since last year, spending a lot of time with the policy makers," said Doug Leland, general manager of Microsoft's Identity and Security Business Group, in an interview. "This is an agenda we're trying to advance with the reset of the industry and with policy makers and lawmakers and law enforcement as a proposal of a solution to tackle a very significant problem."

Last September, for example, Microsoft made a submission to the Internet Safety Technical Task Force, a group looking at ways to improve online safety for children. Microsoft's paper (pdf) advocated the replacement of Web user names and passwords with Information Card systems, such as Microsoft's own CardSpace technology, and calling on a collaboration between government, industry and child development experts to solve the problem.

Microsoft has been working with a number of countries, including Singapore, Belgium, the U.K. and France to develop government-issued digital credentials, Leland said.

In his video, Charney called for a "model where people get in-person proof and then can pass digital identities on the Internet. So, for example, if you got a drivers license or a passport and it also had a digital certificate on it, you could later pass your identity to a site along with your credit card number for example and they would know you are who you claim to be."

But Microsoft doesn't think these digital IDs should be mandatory.

In December, Charney sent a letter to the Attorney General Richard Blumenthal of Connecticut and Roy Cooper of North Carolina arguing that any move toward mandatory digital IDs "would not only compromise privacy but would have a chilling effect on other important social values such as freedom of expression."

Instead of centralized digital IDs, Microsoft is pushing a concept known as federated identity, where different organizations develop ways to share and trust identity information about their users. With CardSpace, Microsoft has been careful to give users the ability to decide what information they want to share.

"The way in which Microsoft has been thinking about it has been very constructive," said John Palfrey, a co-director of Harvard's Berkman Center, which published the Internet Safety Task Force report. "They would leave all or virtually all of the decision making in the hand of the users."

Charney's RSA keynote, entitled "End to End Trust: A Collaborative Effort" is set to be delivered Tuesday morning. RSA runs at San Francisco's Moscone Center from Monday to Friday next week.

[read more : http://www.pcworld.com/article/163311/microsoft_the_internet_needs_more_trust_to_grow.html?tk=rss_news]

Yahoo Google search advertising deal

This, i guess was always in the offing. Just read an article in NYtimes.com on a proposed Google Yahoo deal for search advertising. It may be a way to fend of Microsoft bids for Yahoo, but it sure does raise many questions pertaining to Anti Trust issues and also an apprehension over the Yahoo - Live.com search sponsored results ie. yahoo's ads on Live.com.

Google Inc.'s top executives expressed hope Thursday that the Internet search leader will be able to form a potentially lucrative advertising partnership with Yahoo Inc.

"We have been talking to Yahoo and we are very excited to be working with them," said Google co-founder, Sergey Brin. ''We share a lot of values with them.''

Neither Brin nor Google Chairman Eric Schmidt mentioned how far along the two sides are in their negotiations after a two-week test which was completed last month. During the trial run, Google supplied a small portion of the text-based ads that appeared alongside the search results on Yahoo's Web site.

Because Google's technology proved it, the alliance could help Yahoo snap out of a prolonged slump that made it vulnerable to Microsoft's buyout bid. Microsoft also cited Yahoo's willingness to subordinate its own ad system to Google's as a reason for dropping its bid.

"We really believe in companies having choices about their destinies," Brin said. "It's not about scuttling (the deal). They were under a hostile attack and we wanted to make sure they had as many options as possible."

Schmidt left little doubt that Google was pleased to ruin the deal. However, he said he wanted to keep Yahoo out of Microsoft's hands largely because he was concerned the world's largest software maker would abuse the added power.

Schmidt described Google's current relationship with Yahoo as "very, very friendly."

If Yahoo were to sign a long-term ad deal with Google, some analysts believe that would repel Microsoft for good. Although Microsoft executives have publicly indicated they are looking for other ways to bolster the software maker's unprofitable Internet operations.

This partnership almost certainly would face intense antitrust scrutiny as the two companies together control more than 80 % of the U.S. market for online search advertising.

"If there were a deal (with Yahoo), we would anticipate structuring the deal to address the antitrust concerns that have been widely discussed," Schmidt said.

Although Schmidt wouldn't specify how Google will address the antitrust issues, analysts speculate, that it could be done by running the partnership as an auction-style system that would allow other rivals, to show ads on Yahoo.

Google shareholders attending Thursday's meeting didn't seem to care about the implications of a potential Yahoo partnership.

Now i wonder what is brewing in the the Silicon valley.

Facebook - New target for Microsoft

After talks with Yahoo failed, the news is that Microsoft Corp. informally approached social-networking Web site Facebook Inc. to gauge its interest in selling itself to Microsoft.

Microsoft's investment bankers recently contacted Facebook as it looked likely the Redmond, Wash., software company might back away from buying Yahoo. Though there is no active discussions between the two, it is unclear if closely held Facebook would consider selling. The approach was previously reported on the AllThingsD.com Web site, owned by News Corp.'s Dow Jones unit, publisher of The Wall Street Journal.

Yahoo however continues to face challenges of its own. It is said tha Google Inc. executives are now thinking whether to pursue a search-advertising deal with Yahoo.

Separate discussions between Yahoo and Time Warner Inc. also continue. However, they say there is less urgency to reach a deal now that Microsoft has exited the stage. The two sides are discussing combining AOL and Yahoo.

In a letter to Microsoft employees (after failed talks), Microsoft Chief Executive Steve Ballmer said the company would explore acquisitions and increased investment in its own online services.

Facebook is a fast growing Web service that has become a hub for all kind of consumers. Last year, Microsoft bought a 1.6% stake in the portal, valued at $240 million. It then valued Facebook at $15 billion.

Mark Zuckerberg, Facebook's founder and chief executive, has resisted the idea of selling his whole company. He recently made several high-level hires like Chamath Palihapitiya: VP-marketing & operation, Gideon Yu - CFO etc. that suggest he intends the company to remain independent. Facebook would still faces possible fallout from the weak broader economy, which could pressure online ad based ventures.

Facebook's main attraction for Microsoft is its rapid growth and popularity. In March 08, Facebook had 109.2 million visitors which is a 240% increase from March 2007, according to comScore Inc and expects revenue of $300 million to $350 million this calendar year (which is approx $150 million last year). By comparison, Microsoft's Web sites attracted 563.2 million visitors world-wide in March which is just a 7% increase from the year ago.

The big question for Microsoft is whether Facebook can become a major source of online advertising. Facebook has tried to expand online advertising, but half of its revenue last year came from a partnership with Microsoft. After its investment last year and a deal struck in 2006, Microsoft has an exclusive arrangement to sell display ads on Facebook through 2011. Acquiring Facebook might not significantly add to Microsoft's inventory of space in which to show ads across the Web.