As expected, Google continues to be the number one site, with a very wide margin. However, they have undergone a slight setback, as the number of unique viewers has gone down from 144.1 million in January to 141.1 million in February. The number of minutes spent online per session has also gone down.

On the other hand, Microsoft has had a very good month as they have risen from ranking seventh in January to ranking second in February. They have also had 48.8 million unique viewers in February which represents an absolute increase of 10.7 million visitors more than they had January.

Yahoo! has retained the third place as before and Facebook is now fourth in the list, in place of Viacom. VEVO, which was second in January, now occupies the fifth place, and Viacom is sixth, in place of Facebook. AOL has now taken Microsoft’s previous position at number seven. Turner Digital has retained the eighth spot in both months. Hulu, which was tenth in January, is now at number nine, and NBC has entered the list at number ten.

The study also shows that 170 million users watched online videos in February in the U.S. at an average of 13.6 hours per viewer and more than 5 billion viewing sessions.

It remains to be seen if the list will remain more or less steady in March or will change drastically again.

The deal has been finalized for a sum of $315 million, of which $300 million will be paid in cash.

Co-founder of The Huffington Post, Ariana Huffington will be made the President and Editor-in-chief of the new company, the Huffington Post Media Group, which will include all the content on AOL properties as well as the Huffington Post.

News of this deal has caused quite a ripple in the stock market as far as newspaper publications are concerned. Stocks of Gannett Co. rose by 46 cents or 2.8% to $7.12. The New York Times rose by 29 cents or 2.7% to $10.90 and Media General Inc. rose by 58 cents to $6.01.

This could be because it is widely expected that the deal between the Huffington Post and AOL will improve the value of leading branded digital properties, according to John Eade the Chief Executive of Argus Research.

The merger is expected to generate a user base of 117 million visitors a month in the U.S. and will reach 270 million users worldwide.

However, regular readers of The Huffington Post and a number of other online blogs have not greeted the news with as much enthusiasm as Wall Street. Readers are primarily concerned that corporate ownership will mean that the blog will no longer continue to provide unbiased, liberal information, but will instead lean towards right-wing journalism to satisfy their corporate owners.

One commenter on the post announcing the merger said “With an influx of corporate money, will the bloggers now be paid? And if they are paid, will that payment affect their ablilty to write articles that able to tell the truth as they see it, or will they only be allowed to participat­­e on Huffington Post if their writing meets corporate guidelines on what is considered to be acceptable­­?”

Others have threatened to leave the site en masse on one day, even going so far as to state that loosing a few thousand dedicated readers was probably calculated into this merger decision, so the user attrition should be bigger than AOL would have anticipated.

The deal should be finalised by the end of the first quarter of the year or early in the second quarter.

The social news experiment from AOL, which was first called NetScape Social News, was rebranded to Propeller in 2007.

While the site had initially hoped to be able to give serious competition to Digg, the fact is that they never quite caught up with Digg, and of late both the site and the parent company AOL have been struggling.

Twitter streams from Propeller were always lagging behind by several days. Wikipedia claims that the site is being run by a team of just 2 people.

While NetScape was doing quite well for itself, it was expected that Propeller would be able to carry on from where NetScape left. However, the popularity of the site fell by about 55% in just nine months – in November 2006, they had 305 million page views per month, but they fell to just 137 million page views in August 2007.

A major reason for this sudden drop could be the fact that hey did not provide any links between NetScape and Propeller at the time of the change-over. If this had been done, more users may have continued to use the rebranded service rather than switching over to a competitor.

The site will be shut down on 1 October 2010.

One of the reasons for the irritation is the fact that more often than not, the ad is of absolutely no relevance or interest to the user, and the user then feels that being forced to watch it is a waste of time.

A few companies have now decided to try and rectify the situation by offering users a choice. Users on certain websites will now be able to select the ad they would prefer to watch from a choice of 3 or more ads, thus letting them see the ad that they have decided would be most interesting to them at that point in time.

While helping users, this option also has the added advantage of being beneficial to advertisers. Agencies and brands will improve their consumer targeting, thus increasing the possibility of making a sale, which is the ultimate bottom-line for a marketer.

The new tool that facilitates such ad delivery is called ASq. It will be functional by next month.

Microsoft, Yahoo!, Hulu, CBS and AOL have already decided to use ASq, while others such as YouTube are still weighing the pros and cons.

ASq’s new concept in video advertising is appreciated by most. However, there are those who disagree with the concept. Richard Wheaton of Ogilvy & Mather believes that unless users get to know about certain products and services, they would never be able to make use of them. ASq will restrict the exposure of such products from users, thus defeating the very purpose of advertising.

On the other hand, Uyenco Shatto, global research director at Microsoft Advertising says, “We’re getting smarter about what makes more impactful advertising. The big ‘aha’ here is understanding what makes a viewer choose a particular ad.”

ASq is expected to further improve the market value of the global video ad market, which is already $3.1 billion. The global video ad spend which was $2.2 billion in 2009 is expected to go up to $11.3 billion by 2014.

According, to the Business Insider, inside sources reveal that AOL is actually looking for a buyer in Microsoft. Even if these rumours prove to be false, anyone who gets the search deal would have an edge for an eventual takeover of the company.

The rumours could be based on the fact that Microsoft has for long been on the lookout for a company that can help boost their share in the search market.

Microsoft can certainly afford to buy over AOL. They would be able to merge several of their features, such as mail, search and maps. They would also acquire a lot of man power, which would help in future projects and ideas. Most importantly, though, they would manage to cut off a major source of revenue for Google and secure another small chunk of the search market.

Google currently has a search deal with AOL. The search giant is not likely to be interested in a buy out of the company. Their interest would only be in renewing the search deal. However, if push came to shove, they might buy AOL just to prevent Microsoft from getting it.

According to experts, Microsoft may wait for AOL’s quarterly results before finalising such a deal.

Executive Vice President, Jon Broad, stated in a memo to employees, “Bebo, unfortunately is a business that has been declining and as a result would require significant investment in order to compete in the competitive social networking space. AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.”

AOL has recently separated from its parent company, Time Warner, and is itself struggling to compete against other dial up services.

A strategic evaluation of Bebo is underway, and the results are expected to be out by the end of next month. It is  reasonable to expect that the estimated selling price will be much lower than what AOL paid for it.

According to comScore, Bebo had 5.8 million users at this time last year, but has only 5.1 million users at present, which itself is a bad sign. Compare this with the hundreds of millions of users that other sites like Facebook and Twitter have gained, and Bebo’s figures seem miniscule. It is highly likely that Bebo has been a casualty of the growing popularity of Facebook and Twitter.

It is also possible that AOL may eventually decide to abandon Bebo, instead of selling it. This would allow AOL to avail of certain tax incentives, rather than selling Bebo at a very low price and showing a capital loss on their accounts.

187 million users are the equivalent of 91% of the total U.S. Internet audience. AOL’s reach reportedly grew by 8% compared to the same month in 2008.

Yahoo! Network, which reaches 180.9 million U.S. users, was ranked second place and grew by 9% in the same period. The Google Ad Network occupied the third place with a reach of 178.1 million U.S. Internet users, and grew by 13% in that period.

Microsoft Media Network has turned out to be the fastest growing ad network, with a growth of 31% compared to the same month one year ago. Collective Network, which grew by 22%, was the second fastest grower and Audience Science, which grew by 16%, was placed third in that category.

According to comScore senior Vice President, Jeff Hackett, “Ad networks continue to be a powerful mechanism for delivering a large audience online with eight different networks reaching 75% of the entire U.S. online population.” Hackett believes that in 2010 ad-networks will continue to innovate and perform well.

Top 10 US ad networks ranked by total unique visitors in December 2009

Chitika recently conducted a study that revealed that users of Microsoft browsers and operating system have a tendency to click on advertisements more than users of other services such as FireFox, Safari, Chrome etcera. Not only that, even users of Windows click on ads far more frequently than users of other operating systems such as Mac OS or Linux.

The findings of this study are significant as it was conducted using a sample of over 130 million impressions across 80,000 sites.

The details emerging from the study are as follows:

• Internet Explorer users on average have a click-through rate (CTR) of 1.05% compared to 0.66% for Firefox users, 0.50% for Safari users and 0.21% for Chrome users
• Windows users have a CTR of 0.92%, while Mac users have 0.52% and Linux users have 0.46%

These findings have been indirectly validated by TechCrunch, where reports that users of Microsoft’s search engine Bing have a higher CTR than users of other search engines. Bing users have a CTR of 1.74% as opposed to 0.98% for Google users and 1.37% for Yahoo! users.

TechCrunch insinuates that the higher CTRs from Microsoft users is because these users are more gullible and easier to dupe than others, which has ruffled a few feathers, even though it is probably true.

Microsoft users don’t click the most, though. AOL, which is a much smaller network has the highest CTR of 2.5%.

AOL acquired Third Screen Media, a mobile advertising company, in 2007 for $80 million. According to sources in the know, the new CEO of AOL, Tim Armstrong, and the head of the advertising department Jeff Levick are planning to either shut down the mobile advertising network or just letting all their contracts lapse over a period of time.

It has been reported that AOL is not renewing the deals they have with their existing publishers for their mobile ad network. Instead, these publishers are quietly being allowed to go to AOL’s competitors. AOL has also not put out any new publisher proposals, which obviously means that they are losing a lot of clients, and surprisingly this does not seem to be bothering them, which again indicates an intention to discontinue the business.

A number of current employees of Third Screen Media are reportedly out in the field, hunting for new jobs.

It is believed that AOL will instead focus on developing mobile content and will also rebuild their mobile ad technology, which will then be able to service other AOL-owned properties.

This is certainly a good move at this stage, since AOL will be turning into a separate entity from Time Warner shortly. They will then have businesses like mobile web publishing, AOL Mail, MapQuest, AIM and iPhone apps, which they can monetise.

AOL could always rebuild their mobile advertising business again later with even better technology when the market turns and demand for mobile advertising really picks up.

One of the reasons for their low adoption rates could be the complexity involved with display advertising. Display ads are available in several formats, such as images, videos and interactive gadgets. It can be a laborious task to manage the organisation of such varied ads across thousands of Google Content Network sites. Hence, advertisers have not been too keen on this form of advertising.

Publishers on the other hand, are left with a lot of unused ad space on their sites.

To help simplify this process for both the parties involved, Google has now launched the new DoubleClick Ad Exchange. This ad exchange will be a platform from which publishers can sell and advertisers can buy the required ad space via their existing Google AdSense and Google AdWords accounts.

The exchange will function as a real-time automated auction market. Advertisers will try to get better ad space, while publishers will try to extract better rates from the advertisers and also sell more of their available ad space.

The exchange will also allow advertisers to measure the performance of their ads, thus offering a degree of accountability. It will also make display advertising more accessible to all advertisers.

In 2008, the total revenue generated from online advertising was $23.4 billion, while display advertising accounted for only $7.6 billion of that total. Hopefully, the new, better integrated Google AdWords / DoubleClick Ad Exchange will help to increase the revenue generated by display ads.

So far, Yahoo! remains the market leader for display ads ever since they bought RightMedia in 2007 for $680 million. Google, no doubt, hopes to be able to now overtake Yahoo!

Introduction to the new, open Google Ad Exchange

Data pulled from the 4 billion page views collected across more than 3 million websites that use the StatCounter analytics solution showed that Google monopolises the mobile search market. The search giant, whose brand is now a neologism for searching, delivered 96.23% of mobile searches worldwide in the first half of 2009.

Yahoo! follows second, worldwide, with 3.24% mobile search market share and Yandex.ru is third with 0.14%.  Ask Jeeves (0.11%) and AltaVista (0.07%) round off the top 5 mobile search providers. The rest, including Microsoft, account for no more than 0.21% of the worldwide mobile search volume.

In the UK, the situation is similar, with Google commanding 98.8%, followed by Yahoo! (0.86%) and, surprisingly, Ask Jeeves (0.14%).

Before screaming “anti-trust” or falling into depression caused by the world turning into a Googleopoly, let’s take a moment to examine the data…

While the size of StatCounter’s data set is nothing to laugh at, most of its volume comes from fixed internet websites rather than mobile sites. In fact, the page views and number of sites using StatCounter to track visitor data on the mobile Internet is bound to be much, much lower.

That’s not all. StatCounter data itself is not wholly credible due to the fact that they use cookies and JavaScript to track visitors, both of which often don’t work when websites are viewed 0n a mobile device. Therefore, any data delivered by StatCounter is only valid for a small subset of all the different mobile phones consumers use to search the Internet.

Last year, Nielsen reported that Google’s mobile search market share in the USA was an estimated 61%, while Yahoo! and Microsoft got 18% and 5% respectively. Not a lot has changed in the mobile search market since June 2008, which makes it safe to assume that Nielsen’s numbers would not be drastically different today.

This still leaves us back at square one, asking “has Google already won the race for mobile search supremacy before it even really began”?

The Mobile Search Benchmark is a means of ranking mobile search providers, with regards to five different criteria. They are, discoverability, readiness, availability, response time and consistency for a search operation carried out through a mobile handset.

Only the larger, better-known search providers have been considered for this survey. The selection was based on comScore’s Expanded Search Query Report published in July 2008.

Nine companies were selected for this survey: Yahoo!, Amazon, Ask, Google, AOL, Craigslist, eBay, MySpace and MSN. Facebook was not included in this survey, as their mobile web applications did not meet the technical requirements of this study.

To ensure a uniform playing field for all participants, a predetermined task was set out, with a fixed set of steps to be used while performing the search operation on each participating provider. One had to first navigate to the home page of the mobile web site, type a search query, and then click on ‘search’. The search results page would then be displayed and would show the search result obtained for that specific query, which were then graded.

According to the study, Yahoo! has currently been ranked the best site for mobile search operations. The provider rankings within individual categories were as follows:

Discoverability

Ability of a consumer to discover the location of a company’s mobile site on the Web.

1. Google
   MySpace
   Yahoo!
2. AOL
   eBay
   MSN
3. Amazon
4. Ask
5. Craigslist

Readiness

Ability of the mobile web site to be rendered on popular mobile devices.

1. Ask
   eBay
   Yahoo!
2. Amazon
   AOL
   Craigslist
   Google
   MSN
3. MySpace

Availability

Percentage of successful transactions out of the total number of transaction attempts.

1. Google
2. Amazon
3. Craigslist
4. eBay
5. Yahoo!
6. MySpace
7. AOL
8. Ask
9. MSN

Response Time

Time required to download each page in an entire multi-step transaction.

1. Amazon
2. Google
3. Craigslist
4. Ask
5. Yahoo!
6. AOL
7. MySpace
8. MSN
9. eBay

Consistency

Standard deviation of the response time of completed transactions

1. Amazon
2. Craigslist
3. Google
4. Ask
5. Yahoo!
6. AOL
7. MySpace
8. eBay
9. MSN

Overall Ranking

1. Yahoo!
2. Google
   Amazon
   Ask
3. AOL
   Craigslist
   eBay
4. MySpace
5. MSN

The research also measured performance of mobile sites in other industry verticals. AirTran was found to be the highest ranked mobile airline site and Bank of America was ranked top for mobile banking.

Overall, though, the results indicated that mobile websites are 30% less efficient than traditional Internet sites.

Americans carried out 13.5 billion searches in the month of January 2009. This figure is 7% higher than the corresponding figure just one month ago, in December 2008.

Expectedly, Google sites were the leaders in the number of searches conducted with 59% share of the market, followed by Yahoo! sites having 15% market share and Microsoft sites having 6% share of the market. AOL and the Ask Network had 3.9% and 3.7% respectively.

Of the 11.7 billion (up 5% from December 2008) searches conducted across all Google sites in January 2009, Google Search accounted for 75% while YouTube and other Google sites contributed to 25% of the volume.

Yahoo! and Microsoft’s search metrics are much more heavily skewed towards their main search properties, with both contributing to 99% of their individual total volumes.

AOL and the Ask Network, on the other hand, had a much more even distribution. 58% of AOL searches coming from the search network while 42% came from MapQuest and other AOL properties. Less than half (49%) of the Ask Network’s searches came from Ask.com while 51% came from MyWebSearch and other properties.

A comparison with the same period a year ago shows that Google’s market share grew 6% points between January 2008 and January 2009, while that of Yahoo! fell 2% points and Microsoft fell 1% point.

Yahoo!, though, has actually gained market share for the fifth consecutive month now, at the expense of Microsoft and Ask.com mostly, but also at the expense of Google last month.

A recent story run on TechCrunch says that according to trusted but anonymous sources, AOL is planning to sell Bebo as its performance has been far below expectations.

Both AOL and Bebo have denied this, saying “there is no truth to this rumor”.

According to sources, when AOL bought Bebo last March, Bebo was marketed as a clever startup that was able to win over ad agencies and clients by presenting itself very well. Ad agencies convinced their clients that they must get on to Bebo, which was growing more popular by the day in the relatively new social network market.

When AOL saw this, they obviously felt that it would be a wise move to buy Bebo, and accordingly they did so on March 13 2008 for $850 million.

Time, however, proved that Bebo did not perform as well as expected. While Bebo is popular in the U.K. with 10.5 million users, its worldwide user base is just 22.6 million.

Facebook’s meteoric rise in popularity is the biggest factor contributing to Bebo’s failure. That, and the fact that singular social networks are no longer as popular as they were, due to the growing popularity of the open social platforms is partly responsible for this. The current economic climate makes the performance of the company look even poorer. While Facebook is believed to have earned $250 million last year, and MySpace much more than that, Bebo has managed only $20 million.

A spokesperson at Bebo, however, rubbishes the rumors of a possible sell off by AOL, saying that Bebo has launched a new tool, Social Inbox, just last month. It is doing very well and will allow users to read emails from various sites and also access other social services like Twitter and Flickr. It will also integrate AOL’s instant messaging service. AOL is also reportedly planning further expansion with Bebo.

Only time will tell whether the rumors turn out to be true or not.

Yahoo! announced their quarterly earnings yesterday. Profits dropped 64% compared to the same period last year, which was in line with analysts’ expectations. Revenues were up a bit, but the total forecast for 2008 had to be reduced.

The 10% reduction in jobs should help the company control costs and therefore increase profitability. The news was welcomed by Wall Street, as the Yahoo! stock rose in after-hours trading following the earnings announcement.

Rumours about the lay-offs were circulating since last week. Speculation arose that employees would not be offered anything more than the basic government-mandated severence package. Employee morale in the company has fallen once again this year, with the common sentiment among employees seeming to be “why bother?”

Chief Financial Officer Blake Jorgensen said the company is conserving cash, “to allow us to do some of the things we may be looking at.” This statement has fuelled further speculation that the possibility of Yahoo! acquiring AOL might actually be more than just an idle rumour.

Behind all the uncertainty, one thought is ever-present in all investors’ minds – Yahoo! should have taken Microsoft’s offer earlier this year, and run! With share prices at a five-year low at around $12.00, with little hope of returning to even $20, the $31 per share offer from Microsoft seems like a generous gift that they turned down.

Jerry Yang is definitely not the favourite person in many peoples’ books at present. Investors, employees and users on a number of online message boards and blogs are calling for his resignation and wondering if he will leave with the same severance package (or lack thereof) as the other unfortunate employees.

Perhaps the most useful feature in this update is the ability to provide directions with respect to well known landmarks such as petrol pumps, fast food restaurants, convenience and grocery stores, hotels and so on. However, this will be made available only to users in Canada and the U.S.A. for now.

Users will now get a better bird’s eye view of various locations in several cities of North America. 3D images will also be available. Live Search will also provide information about the local weather conditions, and 3D pictures of cloud formations over given areas will be updated every 3 hours.

Locations with similar names and alternate spellings will be accessible through a ‘near-matching’ feature. Related neighborhoods will also be included in the search results.

Localised maps of all regions will be available on desktops as well as on mobile phones. Mobile Internet users will be provided with better imagery than before.

Users will now be able to decide whether they want to choose driving routes based on the shortest time taken, the shortest distance or direction of traffic flow; and all this will be made available with a single click.

Microsoft is definitely as good as Google, if not better, as far as the technology behind their maps is concerned. That, however, is not enough to make Live Search Maps the leading service. Microsoft needs to seriously rethink its overall user acquisition strategy or they will continue to lose market share in spite of having a better product.

Analysts Jim Friedland and Kevin Kopelman report that compared to their earlier study that was conducted in July 2007, the current study shows that Google Maps has progressed considerably, while its competitors, Map Quest by AOL, and Yahoo! Maps have stagnated.

Live Search Maps from Microsoft has shown some improvement in the past year, but their map service still remains the least popular among the top 4 services. Friedland and Kopelman further stated that “Yahoo! and Map Quest do not have the resources to keep pace and are forced to aggressively monetise a declining franchise in the maps segment.”

Apart from having very good maps, Google also has additional features, such as Street View, driving directions, traffic monitoring and public transport directions. But what makes them the winner is simply their dominance as the leading provider of information on the Internet.
The most important rammification of Google’s dominance is the importance map-based data and location-specific information will have in the upcoming mobile Internet market. People on the move will often want to refer to these maps when they are in unknown surroundings. Google Maps will be able to attract advertisers in the near future and hence help companies generate even more revenues. An investment made to improve maps on the Internet today will pay off many times over in the near future.

When the newly constituted Yahoo! board met for the first time, one of the major points on their agenda was to settle the matter of whether or not to proceed with discussions with Time Warner, for the possible purchase of their Internet arm, AOL, which Time Warner has wanted to get rid of for a while now.

The board has been given the go ahead to pursue the matter with Time Warner, but no negotiations have taken place yet according to sources.

The two companies had been in discussions with each other over this matter earlier, but failed to reach a settlement then.

If Yahoo! And AOL can reach an understanding, it might help to improve their position in the Internet advertising and content market, but more importantly, such a deal is likely to dissuade any future takeover attempt by Microsoft, who have also shown an interest in AOL. As things stand,

Microsoft is certainly in a better position to pay a much higher amount than Yahoo!, which would be the bottom line for Time Warner. However, a Microsoft-AOL merger would do absolutely nothing for the software giant’s search marketing business, and such a move would be nothing but a petty attempt to get back at Yahoo!
Interestingly, in an interview with CNBC last Friday, Mr. Icahn still felt that eventually Yahoo! would have to “do something” with Microsoft or Google Inc. would “kill” the company.

Speculation, however, continues to persist about Time Warner washing their hands off AOL, by selling it to some big player in the online advertising market.

The second quarter results show that it was not a very lucrative season for AOL. Revenue has fallen to $1.1 billion, which is a drop of 16 percent. Only their advertising revenues have gone up by 2 percent (i.e. $8 million), but that gain is certainly not sufficient to make up for the losses suffered by the Internet access division.

The once popular internet service provider has lost 2.8 million customers since last year, bringing down their subscriber base to just 8.1 million users. They have lost 604,000 subscribers in the second quarter itself. In monetary terms, that is a loss of $200 million. Ironically, the company had increased its charges for the dial-up services in late June.

The operating income of AOL has dropped by a steep 36 percent and is now pegged at $230 million. Unconfirmed reports state that AOL’s access business may find a buyer in EarthLink.

In the meantime, CEO of Time Warner Cable, Glenn Britt, says that revenues are up 7 percent, seeing a decline only in television pay-per-view. An additional 214,000 people have subscribed to the ‘triple play’ offering of cable TV, broadband Internet and telephone service.

It is believed that the meeting was organised following the breakdown of talks between Microsoft and Yahoo! yet again.

Microsoft has been trying hard to improve their position in the search market, due to which they have held negotiations with Yahoo! repeatedly. The board of directors at Yahoo! have staunchly held on to their wholly unreasonable anti-Microsoft stance, causing the Redmond-based software giant to seek alternatives.
AOL, in the meanwhile, has been holding talks not only with Microsoft, but also with Yahoo!, as its parent company Time Warner Inc. is trying to sell off all or part of AOL to the highest bidder. Google, which is a competitor to both Yahoo! and Microsoft, has a 5% stake in AOL, and also has a broad advertising partnership with Yahoo!

The Wall Street Journal has not revealed its sources, but says that the talks between Microsoft and AOL are still at a preliminary stage, and were about the online operations of both companies. Officials of both the firms involved have refused to comment.

It is also reported that investor Carl Icahn, has further intensified his efforts to have the entire board of directors of Yahoo! replaced during a shareholder vote on August 1, following the latest failure of talks between Yahoo! and Microsoft. The following weeks could once again shape the future of the search market.

Several moves and counter moves are working simultaneously in the Microsoft-Yahoo! battle. The Wall Street Journal reported last week that Yahoo! is negotiating with Time Warner and seems to be very close to concluding a deal whereby Time Warner would amalgamate AOL into Yahoo! and make a cash investment in return for a 20 percent stake in the newly formed alliance. The deal reportedly values AOL at $10 billion, excluding their dial-up business. Yahoo! could then use the cash to buy over large amounts of its own stock, for somewhere between $30-40 per share.

Concurrently, it appears that News Corp, who was wooing Yahoo! a while ago, has turned the tables and is believed to be trying to cut a deal with Microsoft. If this deal goes through, the AOL-Yahoo! deal would not take place and Yahoo! would instead have to settle for a Microsoft-MySpace-Yahoo! deal.

Yahoo! also announced last week that that they will conduct a limited 2-week trial run featuring Google AdSense ads in Yahoo! search results. Google will place its ads in about 3% of Yahoo! search results (instead of Yahoo!’s own ads.) The AdSense ads will be limited to the U.S. only and will not be featured on the Yahoo! Content Network.

While all of the above mentioned deals would throw up practical difficulties during the integration phase, a 3-way deal between Microsoft, MySpace and Yahoo! could be especially big and would attract enormous amounts of traffic and advertising revenues.

According to Yahoo! all of this is being done with a view to improve its stock holder value. However, the deal with Google reeks of their top executives’ stubborn dislike of Microsoft, regardless of what would actually benefit shareholders. They are clearly indicating that they would prefer to let go of their biggest asset (Yahoo! Search) rather than let Microsoft buy them over.

The New York Times reported that Yahoo!’s board met on Friday to discuss their options and have decided to continue talks with Microsoft and Time Warner this week. No decisions have been reached, though.

In fact, a deal between Microsoft and Yahoo!, with or without AOL or MySpace, appears to be the only possible way to check the growth of Google. Yahoo!’s quarterly income results are due to be announced shortly, and a lot will depend on them. If the results are bad, Yahoo! may want to grab Microsoft’s offer, but if the results are good they may give Microsoft the cold shoulder and keep them waiting in the wings.

Microsoft are adding new features to their Windows Mobile and BlackBerry services, such as improved mapping and a voice interface for the Blackberry. InformationWeek reports that these new services will allow clients to speak into their Blackberry handsets, instead of having to enter queries through the number pads, which can be quite a tedious process.

Users will now be able to find directions to restaurants, theatres, offices and other places of interest by simply speaking the name of the place they want into their mobile devices. It is also expected that customers will shortly be able to map a contacts address, and view custom maps on Virtual Earth on their mobiles.

Bill Gates has long been in favor of technologies such as voice, touch and pen-based computing, but there were several obstacles to this in the past. Voice recognition technology has made a lot of progress in the last year and has been available on Microsoft Live Search Mobile for Windows Mobile devices since October of last year. The support for additional devices will make this service especially useful in cars as the driver will no longer have to look away from the road.

AOL has also launched a new mobile service. The Market Intelligence Service reports that the beta version of AOL MyMobile will allow BlackBerry users to access personalised AOL services through mobile phones. They have also started an AIM TXT short-code service for all major carriers in the U.S.

AOL MyMobile

Windows mobile users will now be able to receive personalised services by downloading AOL MyMobile. This platform will provide integrated relevant Web and mobile search results. AOL MyMobile has drop-down lists and menus, which are easy to access. It will also remember user favorites and recent requests.

Users will be able to save directions to various places and even access them off-line or outside their network range. News of these innovations has raised the share price of AOL’s parent company Time Warner Inc, which has been rumoured to be on the lookout for a buyer for the former Internet giant.

This acquisition will enable AOL to secure a prominent place in the ever-expanding world of social media. Bebo is believed to have a membership of over 40 million users and about 100 employees. According to Falco, “Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media.”

Last year Bebo was the 2nd most popular social network in the UK, behind MySpace. This year, though, it has been overtaken by Facebook, but continues to be favoured by teens and young adults.

Joanna Shields President of Bebo will continue to head the organization, and will report to Ron Grant, President and COO at AOL. Market analyst eMarketer estimates that $4.1 billion will be spent on social network advertising by 2011, compared to $480 million in 2006.

AOL official press release

AOL is expected to further benefit from this latest move, as today brands like Apple and Nike are using Bebo as a platform to develop and maintain interaction with their target customers. AOL has plans to coordinate the services of their products AIM and ICQ with Bebo, thus allowing users to express themselves freely, while at the same time extending their existing relationships. AOL’s advertising service Platform A will also be very attractive to brands advertising through Bebo as it will allow them to keep track of the performance of their ads.

TechCrunch reports that AOL and Bebo had been negotiating this deal since September 2007, but the merger is yet to clear the U.S. and E.U. antitrust regulators before it can be finalized.

The graph alongside holds few surprises. Google has consistently held its pole position in the ranking of search engines. In January 2008 alone the search giant received 7.7 billion search requests on its combined properties, which include Google Search (6.2 billion searches) and YouTube (1.5 billion).

Google’s market share in the US crossed 50% in September 2007, and it hasn’t fallen below the half way mark since then. Yahoo! continues to trail far behind with 2.5 billion searches, followed not as far behind by Microsoft with 1 billion searches. If the 2nd and 3rd ranking players in the market were to join forces, their combined search volumes would be 3.5 billion, accounting for 24% market share.

Over the past 6 months Google has continued to grow at the expense of its competitors. The graph below compares the growth in number of search queries received on each of the Top 5 ranked search engines.

Google grew 14% in terms of the number of queries received over the past six months. Even though all the providers grew in Jan 2008 compared to December 2007, the six-month numbers are not as good for anyone other than Google. Both Yahoo! and Microsoft have fallen, the latter by as much as 7% compared to August 2007 numbers.

Jerry Yang, co-founder of Yahoo! stated in an official letter that Microsoft’s offer of $31 per share “massively undervalues” Yahoo! and they will not consider any negotiations unless the price goes up to at least $40 per share, or an additional $12 billion.

Yahoo! will however have to reassure its share holders, that they can bring the stock prices back up, which will not be easy to do by themselves, given that their balance sheet has shown a fall in profits over the last two years and they continue to lose market share to Google.

In the past AOL and Yahoo! have failed to reach a mutually acceptable deal. However, given the crises both companies are facing (Time Warner are rumoured to be on the lookout for a buyer for AOL), one might think they may be able to settle their differences and work together amicably. However, the reality of the situation is plainly obvious to most – Yahoo! is desperate and trying everything possible to avoid a takeover or get Microsoft to bump up their offer.

A Yahoo! – AOL merger seems highly unlikely. Both the companies are struggling, they do not supplement each others’ shortcomings, and bringing them together will most probably accelerate their decline. Among other reasons, Yahoo! does not have sufficient cash to entice already debt-ridden Time Warner. Also, Google, which has a 5% stake in AOL would resist such a deal, as Yahoo! would then replace Google’s paid search partnership with AOL. And most importantly, Yahoo! would still have to compete with Google, with no additional armour to arrest its fall.

Most analysts believe that with time the Yahoo! Microsoft deal will eventually happen. Talking to AOL is probably just Yahoo!’s way of making execs at Microsoft envious and get them to raise their bid. Microsoft would be wise to just wait this out, allow shareholders to voice their opinions, and when the stocks fall back down, buy Yahoo! in a hostile take over. Others believe that Microsoft should actually pay up right now, in order to make some quick and decisive moves to stem Google’s growth.

The Wall Street Journal reports, “Microsoft’s management is conscious of the risk that a hostile bid could spark resentment among Yahoo’s rank-and-file engineers and other employees whose cooperation is crucial to the company’s success.” However, in his original letter to Yahoo!, Microsoft CEO Steve Ballmer had clearly stated, “Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

Update:

Since the time this post was authored, Microsoft have responded to Yahoo!’s rejection of their bid, calling it “unfortunate” and clearly indicated that they will not back down and are ready to take more drastic steps to acquire the company.

Search Engine Predictions

1. Google will continue to grow and play even tougher
2. Yahoo! will become the next AOL, suffer more layoffs, shut down more divisions but still stay independent
3. Microsoft will try rebranding and reorganizing its online brands again (to no avail)
4. Ask and AOL will continue being insignificant and border on the brink of becoming obsolete

Startup Predictions

1. Web services platforms will become the next battleground
2. Zoho, ThinkFree, Tumblr, Twitter and Digg will be acquired by larger companies
3. $27 billion of venture capital will be invested in startups and Mergers and Acquisitions will increase in volume but not as much in value
4. Consumer adoption of web office applications will grow

Advertising Predictions

1. Google AdWords will continue to grow and dominate the advertising market
2. Gadget Ads will present the area of greatest growth
3. Content networks will evolve and platforms will produce their own content (e.g. Google Knol)

Mobile Predictions

1. Mobile will finally happen!
2. Mobile web usage will grow
3. A second generation iPhone will be released to combat Google Phones (devices based on Android)

Social Media

1. Facebook will grow, but with a lot of bumps along the way
2. Privacy will become a greater concern
3. YouTube will announce HD video, ushering an era of ubiquity of online video
4. Facebook will forge independent deals with startups, making Google sweat!

AOL Mobile UK

The new offering by AOL Mobile configures all Web content to match any phone, irrespective of its make. A once-in-30-day log in feature and an algorithm that remembers the user’s personal requests and favourites make the portal more user friendly than the mobile portals from rivals Microsoft, Yahoo! and Ask.

Like the other portals, the service includes local weather forecasts, horoscopes, news and a regular web and images search feature. AOL Mobile uses Google search technology to power mobile searches.

The dynamic mobile transcoding feature included in the portal’s technology is supposed to easily render Web content from any internet site. Based on this belief, AOL has also chosen to omit the Mobile Search feature that Google offers on its own mobile search service. However, AOL’s transcoding system does not seem to live up to expectations. Even compared to Google’s transcoding technology, AOL Web Surf reportedly falls short.

A near desktop experience?

First -time users of the service and some bloggers are already complaining that the mobile browsing feature is inferior due to the poor transcoding technology. When compared to the Yahoo!, MSN and Ask’s mobile portals, AOL Mobile does not have a wow-factor and it is also on the slower side. AOL should pay more attention to little things such as server response times and sorting local search results by distance in order to win users.

As far as consumers are concerned, AOL Mobile will most likely get lumped with all the other major mobile search portals, as it does not provide any significant improvements, which is what the mobile Internet really needs.

• Core search engines (Google, Yahoo!, Microsoft and AOL)
• Top 50 properties (MySpace, Baidu, etc.)
• Vertical search locations (eBay, Amazon, Expedia, etc.)
• Cross-channel search (Images, news etc.)
• Local search
• Searches on partner sites that produce results from or direct users to core search engine results pages

Worldwide search reporting will be provided in the new format for select European and Asian countries.

The new reporting format comes in the wave of a series of changes being introduced in the way digital properties are being measured worldwide, with companies like Nielsen//Netratings ditching page views for time spent on a site as a better measure of online engagement.

For the month of July, Google continued to reign supreme in the USA, with over 55% of the total searches carried out in home, work and university locations. The expanded search query report for July 2007 showed market share divided as follows:

The same metrics for market share divided among the main media networks is as follows:

The full report can be viewed at the link below:

July qSearch 2.0 Report for USA