OurView: The Opinion Blog

Mary Jo Foley got a great tip last week concerning the possible Live Search rebrand we’ve talked about since this time last year. While the Codename Rome update still went ahead last September, the possible name change was put on hold.

Fast forward one year and Microsoft has failed to acquire Yahoo, and with Live Search Cashback just starting to take off its too early to call it a successful initiative. Does Microsoft want to speed things up, and would a rebrand necessarily achieve this? Kip looked at the branding of Microsoft search several times already, and what’s clear is that while marketing improvements are needed, the product itself still has a way to go, especially in terms of relevance.

While Mary Jo talks about three possible names and her research on them, one possible jumped out straight away to me: Kumo. Apparently meaning either “cloud” or “spider” in Japanese, it wasn’t the literal meaning that got my attention. The giveaway was that the registrar for Kumo.com is CSC Corporate Domains, a company Microsoft has been using increasingly over the past year to pre-register its upcoming product names. Remember that whois I linked in our first post on Windows Live FrameIt? Yes you guessed it, CSC Corporate Domains.

If you spend 20minutes researching further, you’ll see that nearly all major top level domains (TLDs) have been registered or changed owners since March 2008, including .fr, .es, .se, and .co.jp. All of them to anonymous registrants hiding behind the registrars.

The caveat I’ll insert here is that CSC Corporate Domains is used by many corporations to acquire domain names, so it could be any company for any product. However the speed and thoroughness of the acquisitions suggests its not just a small Web 2.0 startup that is looking to launch a product in this space. So if its not Microsoft that is relaunching Live Search as Kumo, then somebody else sure wants to keep their upcoming product secret. But that would be one hell of a coincidence.

After our original post on MobileMe we came in for some criticism for our rather pro-Apple attitude. Our initial thoughts were that Apple had shown a compelling set of products, that showed some nice design touches and boasted strong integration with their hardware, in particular the iPhone.

Well today the MobileMe service is finally stable enough for us to have a play with, so we took another look at Apple’s offerings.  The problems that Apple have had over the last few days with the launch of MobileMe has shown that its not easy building a software + services offering, no matter how big a company you are. In that sense it makes what Microsoft is attempting to achieve with Live Mesh even more impressive, with not just the consumer offering but the entire platform scenario as well.

Signup

The first thing you’ll notice when visiting me.com using Internet Explorer is the Anti-IE7 popup. In fact you can’t help but notice it as it takes over the entire screen, and to continue you must confess to your stupidity in using a Microsoft product. I wonder what they do to Zune users…

MobileMe is not a free product, it comes in at $99 or just under £50 . While there is an initial trial period of 60 days, you’ll still need to provide a credit card on signup in order to give it a try, though there is no billing until after the trial. Overall registration is pretty painless, except for Apple insisting that you give them a phone number.

Upon logging into MobileMe for the first time, users are greeted with a first run video. Unsurprisingly it uses Quicktime, which as I don’t have installed, I therefore can’t comment on the content delivered.

Mail & Contacts

The mail service itself is fairly standard, images in incoming HTML emails are blocked until  allowed and there are vacation reply, email forwarding and POP3 checking options built in. There’s no rich text editor for emails, nor is spell checking performed as you type in IE7, therefore remember to hit the spell check button before sending.

Email attachments are limited to 20MB, however Apple have decided to grey out the screen during this upload and prevent the user from doing anything else. This is the only place in MobileMe where Apple adopts this particular approach, but be warned that on a slow upload you could be stuck doing nothing for a while.

The inbox has a few nice touches. You can preview the first few words of the email and there is a Quick Reply button to save loading up the full email editor. Alas this feature wasn’t working 100% when I tried it.

I don’t really have much to say for contacts, except that compared to Windows Live, the ability to add a photo to a contact was nice. Note to Apple, please set the default date system to match with the billing currency, there’s nothing worse than entering a birthday and then missing it due to Americanisation. Also if you don’t enter a year, it defaults to 2008. Minor points, but irritating nevertheless.

Calendar

The key strength here is the synchronisation between MobileMe and the iPhone/iPod Touch, giving non-Exchange users a way of backing up to the cloud. The web calendar including a to-do list down the side of the screen, however there’s no iCal subscription support. Users can enable a special Birthdays calendar for their contacts, which for those who aren’t using a social networking site is a nice addition.

Gallery

Functionality is basic but the front-end for public viewing is gorgeous due to the small touches, for example the reflection applied below each of the photos. Check out my demo album to see for yourself.

Options include allowing the public uploading of photos, the downloading of the entire album in a zip file and the adding of photos via email or iPhone. These choices can be made on a per album basis, meaning that privacy can be maintained where appropriate.

While the front-end UI is nice, its difficult to see the current web generation migrating from Facebook/My Space due to the loss of automatic public notifications. Facebook Application anybody?

iDisk

Offering 20GB of online storage, iDisk is Apple’s equivalent of Windows Live Skydrive and Foldershare. Users can upload files through the browser, or alternatively install iTunes and map the drive onto the PC or Mac. With iTunes now being Apple’s main route onto the PC, its no surprise to see the MobileMe aspects being bundled in with the media player, but that brings its own set of problems.

Files can be shared publicly if desired, or kept private as a backup of your device(s). For those who want to backup large files and who aren’t using Live Mesh, the maximum file size is 1GB, compared to Skydrive’s existing 50MB limit. Again Apple try to excel with the small touches, and have built a compress option into the website.

Conclusion

Overall, MobileMe looks nice though lacks functionality in some areas. My impressions were that it was more along the lines of a v1 product, which given Apple has been running .Mac for years seems somewhat surprising. The strong integration with iPhone and iPod Touch will definitely help convert some users, however I can’t see people switching email providers from Hotmail, Yahoo or Gmail. The same is true for converting from Facebook or Flickr for image hosting. The cross-Apple scenarios will probably fare well, in particular contacts and calendar. As for iDisk, unless you need the backup functionality for your Mac, you’re probably better off sticking with Windows Live Skydrive and then moving to Live Mesh if you haven’t done so already.

Overall the page rendering had a slight lag, which given the low usage (<5 contacts, <5 email in the inbox etc) is worrying for the heavy users. Performance with Firefox was considerably better than Internet Explorer, This may just be down to Apple getting the service going after its shaky start, only time will tell.

Given the free alternatives available its not worth considering at $99 if you aren’t an iPhone/iPod Touch user. If you are though, definitely give it a try.

With today being the iPhone 2.0 launch, there’s a lot of chat about the new Applications Store and Apple touting the 500 third party applications available initially. Ina Fried already questioned Microsoft about how this compares to Windows Mobile, with the response being that “Microsoft has nearly 18,000” applications” and the implication that this is just the Apple Reality Distortion Field at work. I’m not convinced however.

For starters Apple has a much improved experience, from finding the applications, paying and then through to downloading and installation. Apple offers one main store that is integrated into the devices themselves, with payment made easy via the regular iTunes account. Compare this to Windows Mobile users who typically have to find the programs via a search engine, see if it meets their requirements and and then pay the developer direct.

In addition, a large number of the applications offered now in the Apple store are “official” and by that I mean the developers of the service are the ones who made the iPhone app. Comparing to Windows Mobile, this isn’t always the case. Facebook, MySpace or Ebay developed applications? No such luck. Even Blackberry devices have native applications support from some of these services, which begs the question why is Windows Mobile is being omitted. (Aside, where is the Zune Windows Mobile application for controlling your PC playlist or Media Center application?) Windows Mobile 7 has a lot of catching up to do with the iPhone, and not just in the UI, browsing and attractive hardware arena that are the most obvious improvements Apple has pushed.

Ina also picked up that Microsoft are offering no iPhone applications for their products, and in her interview they downplayed any knowledge of these being in development. Given Activesync has already been licensed, I’d be surprised to see no official applications coming out this year. The Live Search Windows Mobile application is extremely good, why not give the benefits to iPhone users too? After all, Ray Ozzie has a Mesh application for Mac being developed, so offering an iPhone application isn’t such a large leap. With forecast sales of 10million in 2008, it won’t be long until it the iPhone catches up to the 20million Windows Mobile are predicting – with mobile usage rapidly increasing why drive these users away from using other Microsoft products and services such as Windows Live.

In case you missed it, Google released a new toy into beta today, called Lively.  In a nod to Software + Services, you download and install an app in Windows, and then log in to Lively.  Here’s a description of what happens next from Google Blogoscoped:

Once you logged into a room, you can start customizing your avatar. First you can pick from a base type – like male, female or animal – and then you can fine-tune your hair, skin color, eyes and more. You’ll then see yourself surrounded by other avatars, and there’s background music and lots of laughing, grunting and other noises. The graphic has a lighthearted cartoon touch, reminiscent of something like a Lucasarts 3D game. When you talk by using the chat box at the bottom, your words appear as speech bubble above your character.

Lively exists in “rooms” you create, which according to Google’s Niniane Wang, express your personality:

If you enter a Lively room embedded on your favorite blog or website, you can immediately get a sense of the room creator’s interests, just by looking at the furniture and environment they chose. You can also express your own personality by customizing your avatar’s look, showing people who you are without having to say a word. Of course, you can chat with each other, and you can also interact through animated actions.

(screenshot from Google Blogoscoped)

Another 3D product, to probably their great dismay, was announced (well announced again) on the same day as Lively.  Vivaty, a new company with a new product, Scenes.  This one works with Facebook and AIM, currently:

So what does this all have to do with Windows Live?  Well our friend Jamie Thomson wondered the same thing.  Now we really admire Jamie’s passion about Windows Live, but sometimes his blog posts are long on wishful thinking and short on fact.  This time, however, he lays out a compelling case for Windows Live working on some 3D magic of their own.  His synopsis:

1. In Fall (I call it Autumn) 2007 a Microsoft exec said to expect big things in about a year or so.
2. There's a big Virtual Earth release coming up in fall 2008 so says a Virtual Earth evangelist.
3. Someone involved with building 3D models in Virtual Earth has come out and said that Microsoft are building a virtual world using Virtual Earth.

(links added from the original blog post)

In addition, if you watch the Channel 9 video that Sunshine posted here this morning, Mark Brown (hey the same VE Evangelist that said there’s a big release coming this fall – oooh the plot thickens!) interviews two guys who work on the UltraCam, and they are all about separating the plant material from buildings, etc., and also capturing perspective views of buildings.  If you listen closely to the video, you’ll begin to understand that much of what appears in Live Maps 3D is being captured and created (and planned for from the get-go) in the camera and the software.

And of course there’s the whole 3DVia piece, where all kinds of 3D objects can be constructed and included in Live Maps 3D.

+++

UPDATE:  Was just reminded of the Microsoft acquisition of Caligari, who already have a 3D rendering product out – TrueSpace:

Will we be seeing something from these guys soon?

+++

When Live Maps 3d was first demoed, it included advertising in the form of billboards that were inserted into scenes.  Those quickly disappeared, but the technology to add to the 3D scenes (and the concept of having advertising within Live Maps 3D) has been around since the beginning.  Again, here’s Matt Baron, the 3DVia guy quoted above:

First they are building the real world, and step by step they are coming closer to a fully immersive environment.

While both Lively and Vivaty are interesting, especially Lively with the power of Google behind it, neither one of these products seems like much of a step forward from Second Life, which while it took off at first, has kind of lost its edge.  Will a more fully immersive environment, with direct ties to the real world, take the next step in 3D?  While we don’t have any solid information, we think Jamie might just be on to something.

While we stopped writing about the day to day exploits of Microsoft and Yahoo! a bit ago, now that it appears to be coming to an end we can’t help but make a few observations.  When Microsoft first approached Yahoo! about some kind of deal, back in January 2007, the idea of a rapid advance in search share seemed obvious and advantageous.  Since then, Microsoft both wearied of dealing with Yahoo! and probably learned quite a bit about the motivations, and the weaknesses of the company it pursued.  From the moment Microsoft made a public offer for Yahoo!, on February 1 of this year, nothing about the way that Yahoo! responded could have come as much of a surprise to Microsoft.  They’d been witnessing the same kind of action for more than a year behind closed doors.

Make no mistake, finding weaknesses, and then going for the throat, is what Microsoft does best.  As an evil empire, they’re damn good at what they do.

So take a look at what’s transpired since February.  Yahoo! is a shambles.  Microsoft has begun to fire the first volleys in its assault on “the ten blue lines”, with a stated purpose of “disrupting” in search.  Google finds itself, while decidedly in a strengthened position, all of a sudden with the eyes of the Department of Justice upon them.

Jerry Yang and David Filo were shocked when Microsoft pulled back from the table, but was it an admission of defeat by Microsoft, or a calculated move to “disrupt” in a lot more ways than just rolling out a cashback program?  Did Microsoft lead Yahoo! up to the precipice and then give them a swift kick in the behind?  Microsoft walked away from the deal, and truthfully if anything it was a relief to shareholders, partners, and employees.  They came out of it with no damage done.  If they could have pulled off a deal that made sense, at a price that made sense, they would have done so.  By pulling out, they may have dealt a fatal blow to Yahoo!, set Google up for a monopoly battle that might, with any luck, get ugly quickly, and certainly have left the search game with more uncertainty (and more opportunity for Microsoft) than there was before the offer was made.

Over and over, word from within Microsoft is that “we’re in search for the long haul”, and “this game is just beginning”.  Microsoft isn’t going to win in search this year, or next.  Beating Yahoo! down isn’t going to guarantee Microsoft anything, and may indeed make Google even more powerful than before.  But it’s a shot, an opening that wasn’t there before.  Will the disruption they’ve caused by pursuing, and then spurning Yahoo! reveal some chinks in the Google armor?  Will Google be ready to withstand an assault by the DOJ, with Microsoft pulling every string they have available behind the scenes to spur them on? Expect Microsoft to be more than ready to exploit every weakness, to get down and dirty, to pull out its formidable bag of tricks.  Microsoft didn’t lose much by not buying Yahoo!, but what did they gain?  Time will tell. 

Last fall, some of our sources hinted at an upcoming rebranding effort for Live Search, code named “Rome”.  That renaming effort, seemingly thwarted by all the buzz around Yahoo!, never took place (or at least hasn’t so far).  Yet talk continues to swirl around rebranding Live Search, even including some strong hints by Microsoft Online Services President Kevin Johnson, both at Advance08, and again yesterday at SMX Advanced.

Does Live Search need rebranding?  First of all, what is a brand?  Of course a brand is much more than a catchy new name.  A brand is a conversation, the new thinking goes.  More than just a name and a logo, a brand carries emotional attachment.  In a Wikipedia entry on “Brand”, the authors quote Howard Shultz, CEO of Starbucks coffee:

"A great brand raises the bar -- it adds a greater sense of purpose to the experience, whether it's the challenge to do your best in sports and fitness, or the affirmation that the cup of coffee you're drinking really matters."

In a post on Nielsen NetRatings Small Business Professional Center blog, Matt Alderton quotes author Barbara Findley Schenk on brands:

branding is part cosmetic—a name, a logo, and a slogan on your business cards—but more than that, it's a promise that your customers believe in. "If you can't make and keep a promise," she says, "then all the marketing and advertising materials in the world won't work."

…

The easiest way to make customers fall in love with you is to walk your talk. "Great branders realize that the brand is either made or broken not by what you say, but by what you do," Schenck says.

…

"The magic ingredient is consistency," Schenck says. "If a business knows what it stands for and delivers messages and experiences that consistently reinforce how the business is different and more relevant than all competing options, it will succeed in developing consumer knowledge and, eventually, esteem. As a result of this consistency, it will win out over businesses that shift with the wind, regardless of how beautifully they've polished their identities or their marketing materials."
In other words, consistency breeds trust—and building trust is what branding's really all about.

And so in relating these tidbits to Live Search, we begin to see the problems Microsoft is facing.  Live Search hasn’t “raised the bar” up to this point, in fact it has struggled mightily to reach the bar that others have set.  Microsoft has been overly worried about trying to control the conversation, and not worried enough about “walking the walk”.  It hasn’t been consistent, and in fact isn’t up until this very day, when it can’t get behind a brand and get on with it.  The real problem with the Live Search brand isn’t the name or the logo, it’s that what the logo stands for hasn’t been defined, and frankly hasn’t been very good.

Interestingly, although Microsoft says it has “moved on” from the Yahoo! acquisition, and indeed Kevin Johnson said yesterday that by moving on, Microsoft was now free to “fix” the Live Search brand, all indications are that a Yahoo! deal is far from dead.  Even if something less than an acquisition happens (and Carl Icahn made even clearer today that he’s not about to stand for anything other than a new deal that sees Microsoft acquiring Yahoo!, although we’ll see where that goes, maybe as early as next week), those talks are all around search.  And Microsoft can’t define a search product until it declares its intentions regarding Yahoo!, including actually combining the two search products, not just signing papers. Until Microsoft either completes a deal or Carl Icahn goes away, a cloud will remain over the future of a search brand at Microsoft, with or without a new name.

For right now, Live Search needs to work on developing consistency and trust. That may be beginning to happen with a new focus on commercial search; alignment with, but separation from other Live products (Live Mesh, Office Live, Windows Live); and some serious market penetration deals like the one with HP, but there is still a lot of work to do before a new name would make much if any difference.  Search relevance needs to get better, search share needs to grow, and users need to begin to see how Live Search is not only different but better.

Microsoft’s brand problem with Live Search isn’t the name or the logo but the product itself, and the only way to fix the brand is to continue to work on building something worth branding. 

What happens when you take the man in charge of the world’s most-used operating system and ask him to talk about the future? Not a lot when that man is Steven Sinofsky.

Ina Fried from Cnet today posted an interview she did with Sinofsky, asking him about Windows 7 and Microsoft’s plans for the future. Full credit goes to Ina for mentioning the Translucency vs Transparency memo that Mary-Jo Foley published in her book. Josh over at Windows-Connected has the translation out of corporate-speak, which in summary equates to:

“i iz keeping it on lockdown, kthxbai.”

The reason for our mentioning this over here in the online services land is that Sinofsky is also the chief of Windows Live. Oh dear. While we can see some rational behind his corporate disclosure policy for Windows, unfortunately we stand on the total other side of the fence when it comes to the Internet.

• Microsoft isn’t winning in web services. Sure stay quiet when you’re The Man, but when your social networking products are barely a footnote and search share is going nowhere, you should probably start telling users how you’re going to deliver.
  
• Microsoft isn’t making money online. Unlike Google, the Online Services Business Unit has been loss-making ever since Microsoft announced Windows Live. Sure we’ve mentioned that this is due to high-levels of investment, but what about the bloated staff numbers, continued recruitment and the total lack of monetisation plans. Softies ask yourself how many Windows Live services would get VC funding. Microsoft shareholders have a right to know how its leaders plan to turn this ship around, and frankly the silence is deafening.

Perhaps the most worrying aspect about all this is a comment made at the recent MVP Summit, where Chris Jones (Sinofsky’s under-study in Windows Live) apparently said that Microsoft could learn from Apple. From what we heard, his logic was that part of the iPhone’s success was due to there being no leaks, meaning that the PR was controlled and carefully managed. I guess Chris doesn’t read Techmeme then.

To help spell this out:

1. Develop products that are innovative, make money and people actually want

2. Don’t try to control the PR, viral marketing has taken off for a reason

3. Ship on time!

In recent months we’ve also heard that there is a pr team ready to combat any Windows Live Wave 3 leaks, which makes me wonder why Microsoft doesn’t put them to better use and actually start working with the community and putting out positive pr. The Community Clubhouse on Spaces is a start, and any Windows Live uber-users who blog on Spaces should go and fill out this survey to take part (currently private for the time being).

This movie quote is perhaps the most fitting conclusion I could find [NSFW].

In the latest twist on the Microsoft-Yahoo! soap opera, Microsoft issued a statement today, announcing that they were back in the game, but this time looking to make a deal for "an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!”.  While reserving the right to "reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.”

Now what the heck does that mean?  According to sources quoted by Kara Swisher, Microsoft is proposing to buy just the search ad business from Yahoo!:

Sources said that Microsoft, in its long-running war with archrival Google, wants most of all to grab Yahoo’s search ad business to become a credible #2 in the important sector.

Yahoo would would like to keep its online display ad business, its communications assets, including mail and instant messaging, as well as its many content properties.

These are all areas where Yahoo actually excels and should have been focusing on in the first place, instead of competing with Google in search.

In fact, sources said, when Microsoft was considering involving News Corp. in its unsolicited bid to buy Yahoo, it was going to own the search and search ad business, while spinning off all content and communications assets into a separate company that would also include New Corp.’s MySpace.

There are a couple of reasons this makes sense.  First off, Yahoo! is between a rock and a hard place.  It MUST do something, or shareholders, including Carl Icahn, will tear the company apart in order to get fair value.  Even if Yahoo! can hold off Icahn (and there are some indications that it might be able to do that, if Microsoft were to remain out of the game), it faces intense shareholder scrutiny, lawsuits present and future, Google circling the waters smelling blood, and the Microsoft elephant in the room.  Not a pleasant way to face a business day.

And in a letter to his team published by CNET News today, Microsoft President, Platforms & Services Division (edit: fixed job title) Kevin Johnson clarified Microsoft’s strategy:

1. Innovate and disrupt in search - We will disclose some elements of our plans with this week's release of search and sharpen our focus on user experience and business model innovation. The work we have done over the last 4 years on search has established a solid foundation to build upon.
2. Win targeted distribution - With this release of search, we are now ready to throttle up broader distribution initiatives.
3. Reinvent portal and deliver new experiences across PC, phone and web - We are building our new releases of Windows 7, Windows Live wave 3, Windows Mobile 7, Internet Explorer 8, Search and MSN with an eye towards optimizing and unifying experiences and scenarios.
4. Fix our online branding - Our brands are fragmented and confusing today, and we recognize a need to clarify and align our online branding. We are now driving forward to address this opportunity.
5. Win in display advertising - We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation.
6. Build on our strengths in Europe - As measured by comScore in March, our online business in Europe is doing well. We have over 3 times the page view volume and nearly 7 times the minutes of usage compared to Yahoo!, and 68% reach to internet users throughout Europe. We will double down on our investments in Europe and expand on this strong position.
7. Expand strategic partnerships - In addition to our organic innovation agenda, we will expand strategic partnerships that increase inventory on our display ad platform, enable new paradigms in search and accelerate growth in key geographies.
8. Pursue small, targeted acquisitions - Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies. Recent acquisitions including Rapt and YaData are examples of these types of acquisitions.

(emphasis mine)

For Microsoft, acquiring just the search business from Yahoo! would seem to fit in well with these goals.  What is interesting about Google is that while they have dominance in text based advertising around search, a market they basically created, that market may not look anything like it does today in 5 or 10 years time.  Microsoft doesn’t need to win that space, it just needs to “innovate and disrupt”, and win in the next round.

Of course we may have to wait until next weekend (and wouldn’t it be fitting if this all came together on US Memorial Day weekend, thereby capping the ruination of any semblance of a real life for tech journalists?) for this all to play out, but Microsoft wants search share, Yahoo! needs to fend off the sharks, there’s billions of dollars just burning a hole in Steve Ballmer’s pocket, and left unchecked Google will just keep getting stronger.  In his letter, Kevin Johnson mentions the Advance08 advertising summit on Microsoft’s campus.  I’ll be there, and can’t wait to fill you in on what happens next.

Today, billionaire investor Carl Icahn sent a letter to the Yahoo! Board of Directors, announcing his intentions to force Yahoo! to work out a deal with Microsoft.  He announced a slate of candidates who will be up for election at the annual meeting on July 3, and an aggressive plan to acquire enough stock to make sure they would be elected (and then to force a sale to Microsoft).  In the letter, Icahn pulled no punches about his intentions:

It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer.

After Microsoft walked away from the deal, Yahoo! stock slid, but not nearly as far as the pre-offer price of $19.18.  Clearly Yahoo! investors weren’t ready to walk away.  First there were rumblings from large investors about ousting Jerry Yang, and now Icahn has stepped in.  While some have said that the Microsoft pull-out was a ploy, there were clear indications that Ballmer had soured on the whole idea, and that the damaged goods Yang was offering was not what Microsoft was looking for.

In his letter to the board, Icahn addresses the issue:

While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain "strategic alternatives". I therefore hope and trust that if there is any question that these "strategic alternatives" might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.

I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.

Now just to clarify, Carl Icahn doesn’t want Microsoft and Yahoo! to merge because he thinks that it will help Microsoft to compete with Google, or that it will help to guide the future of the internet.  Carl Icahn stands to make a LOT of money on buying Yahoo! shares now, forcing a sale at a higher price, and profiting from that sale.

Yahoo! finds itself today in an even worse position than it was a few weeks ago.  It can try to negotiate a sale with a newly reluctant Microsoft (who may very well see a crippled Yahoo! as a business advantage), it can try and fight and or wait out Icahn, or it can let Icahn tear the company apart in order to get the best value for shareholders (ahem, meaning Icahn).

As for Jerry Yang and the management team, really the only hope of continuing on with Yahoo! is to negotiate a sale, and to continue to lead Yahoo! from within Microsoft.  Yang was probably gone already, facing angry investors at the annual meeting out for his head.  Now, unless a deal is reached, it’s almost a certainty.

But after this latest smoke clears, even in a best case scenario where Yahoo! cuts the bs and offers its best self to Microsoft in a deal, is this a smart thing for Microsoft to do, to buy Yahoo!?

If Microsoft moves quickly (and Yang’s reluctance to deal was a major factor in the pull-out), the reasons that Microsoft made the offer in the first place still stand.  MS would get increased search share, a valuable display advertising business, lots of traffic to Yahoo! websites, engineering talent, inroads into mobile and emerging markets, and the Yahoo! brand.  These latest developments might put the acquisition in a different light, too.  Instead of Big Bad Microsoft trying to destroy poor little Yahoo!, perception might shift more toward Benevolent Microsoft helping Yahoo! out of a jam (ok, maybe not).

Of course the same regulatory hurdles, questions about differences in cultures, and reluctance from the rank and file (on both sides) remain, as well.  But if Yahoo! shareholders force it back to the table, expect Microsoft to be more than willing to listen.

A new blog entry on the Live Search blog from Evan Malahy, Designer, Live Search describes the “guiding principles for this latest version of Live Search” as Simple and powerful. Human. Fast.  And maybe indeed, the new look lives up to that.

However out here in the world, we don’t get to see design concepts, or PowerPoint presentations, or get to sit in on design reviews.  We only see what is presented to us.  So when new looks appear and disappear with no warning or explanation, when elements of designs long gone by still linger, and when a different set of “guiding principles” seems to be in place depending on what Windows Live page we visit, things become less simple, and certainly less powerful.

This is a sampling of the current state of Live Search pages, all taken in the space of a few minutes.  While none of these pages is offensive or poorly designed, is it a common experience?

 live.com home page

live.com search results

 msn.com home page

maps.live.com 

home.live.com 

my.live.com

Note that there are four different “search buttons”, two different “orbs” (and four different sizes), search boxes with and without subcategories (web, image, maps, etc), and 6 different banner backgrounds.

One part of the problem is that without any insights or any visible strategy to go by, we have no idea whether these are works in progress, or whether some of these pages will soon (or ever) be redesigned, or if this is the work of one design team, or many, or any at all.  Some transparency would go a long way here.  If these are in transition, fine.  Just let us know what’s going on (and move fast to get everyone “on the same page”).

Of course a unified search experience won’t vault Live Search up in the rankings, or make searches more relevant, or may not even be necessary at all, for that matter.  In our opinion, however, it might make for a better experience, and that can’t be bad.

For a tour of elements of the new Live Search, check out http://www.newlivesearch.com/

Microsoft just walked away from its proposed acquisition of Yahoo!, ending 3 months of speculation on what would ultimately happen.  While I have been generally supportive of the Yahoo! deal,  I was skeptical of the thought of a long protracted proxy battle.  And with Jerry Yang doing everything he could to burn and pillage the company and let Microsoft pick up the pieces, the deal became less desirable as it continued to drag on.

In his letter to Jerry Yang withdrawing the offer, Steve Ballmer alludes to a potential partnership between Yahoo! and Google, one that he sees tearing Yahoo! apart.  Of course that’s only if it is allowed to happen in the first place, and Ballmer will now turn his attention to doing everything in his power to stop the partnership, which would place Google ads on Yahoo! properties.  But even if it does occur, Ballmer makes a good point that it will weaken and demoralize Yahoo!’s Panama search marketing arm.  Ballmer said:

First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

Certainly one outcome of the pull-out is going to be an all out attack on Yahoo!.  Steve Ballmer is going to want to make Jerry Yang pay, and the best way for Microsoft to gain share in search is to take it from Yahoo!  Yahoo! stock is widely expected to plummet after Microsoft walks, which it is bound to do on Monday morning.  Yahoo! shareholders are going to be fighting mad to see their stock return to the $19 – 20 range, and if Microsoft makes moves in other directions, making it clear that this isn’t a negotiating ploy, Yahoo! stock could fall well below $19.  Shareholder lawsuits, court battles over a potential Google partnership, a disillusioned workforce who may begin leaving in droves (assuming they can find someplace to go – down the street to Mountain View, perhaps?), and an all out assault by Microsoft all point to rough days ahead for Yahoo!  Remember that Yahoo! had been facing a year of rough days before Microsoft shored up its stock, and now that support is gone.

Yahoo! has made a number of moves to reshape the company in recent months, none of them bringing much more than a yawn to investors.  A vague, too little too late attempt to turn Yahoo! into a social networking platform by offering single sign on to their current mess of services (ever hear of Live ID?), might have well sent the stock price plummeting on its own if it wasn’t for Microsoft shoring it up.

As long as Microsoft doesn’t plan on coming back for Yahoo! at a lower price, and Steve Ballmer hints broadly that they won’t (“We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.”), the worse Yahoo comes out of this, the better it is for Microsoft, as a significant share of the search market pie will be up for grabs.

So what else does Microsoft have up its sleeve?  Will it buy AOL?  AOL is clearly for sale, at a much lower price than Yahoo!.  While it doesn’t offer anywhere near the same value, buying AOL would send a strong signal that Microsoft is not just biding its time waiting to come back and save Yahoo!  Will it make a bigger play with Facebook?  Steve Ballmer was spotted outside the Facebook offices last week.  Or instead, will Ballmer himself be on the way out?

It is of course far too early to tell how this latest news will be perceived.  Certainly many at Microsoft will be relieved, this will give the troops in Redmond renewed confidence that their work matters.  While some have criticized Ballmer for making the attempt in the first place, pulling out now rather than engaging in a bloody battle that wasn’t a sure thing could be recognized as a smart move on his part.  There is of course a big danger that all of this will only strengthen Google’s dominance, but that was a danger no matter what transpired.

Microsoft’s attempt to acquire Yahoo! changed the game, whether the deal took place or not.  Microsoft is serious about search and advertising, an online presence.  Live Mesh has shown that there’s more to an online strategy than text ad placement, and Microsoft will be pursuing that strategy across a wide range of properties.  A Yahoo! acquisition might have been the best shot to gain share quickly, but a protracted battle wasn’t worth the hassle, and now it’s on to Plan B.  Can’t wait to see what it is.

First of all, congratulations to Ray Ozzie and the Windows Live Core/Live Mesh team(s) for an impressive initial offering, and for opening up the Live Mesh platform this early in the game.  We’re just getting our head around Live Mesh as a platform, and not just another file sharing app.  BTW this video (edit: fixed link) gives a good introduction into some of the platform aspects of Live Mesh.  One of the problems with this kind of early admittance is that a number of questions around the strategy and direction have to remain unanswered until the platform fills out.  Of course, that doesn’t stop us from asking!

What about Foldershare?

Windows Live Foldershare, still in beta, seems to be totally redundant to what Live Mesh offers.  In fact, with the cloud storage piece, and “coming soon” functionality for the Apple Mac and for mobile devices, Live Mesh seems primed to leapfrog Foldershare quite handily.  This is a familiar Windows Live theme, offering redundant, competing, and confusing services.  We hoped that with the efforts to clean up the Windows Live debacle that sort of thing was behind us.  Until someone comes up with a plausible answer to why on earth anyone would want both Foldershare and Live Mesh installed on the same computer at the same time, we have to ask: what about Foldershare?

When will we see Windows Live Calendar integration?  Favorites? etc.?

As much as Live Mesh is a cool development environment, and as much potential as it holds, end users are still faced with the same old problems.  Windows Live Calendar, for as long as we waited for it, just simply doesn’t do the job we need it to do.  Users need to be able to create, sync, and share calendars easily and seamlessly.  We need the rich abilities of a client app to create calendars, not some watered down web app.  And we need to then seamlessly sync to other computers, to a web interface, and to other users on a granular level.  Live Mesh seems to be built to do exactly that, so where is the calendar?  Are we going to have to wait until PDC or beyond to get a working calendar?

Ditto the same questions for Windows Live Favorites, etc.

What is the backup story, and what about a business model?

Live Mesh is shipping now with 5gb of storage.  Yet I have nearly a TB (not all of it used, of course) on my Windows Home Server, and Live Mesh would seem to be a logical either alternative or adjunct to a backup service.  Will I be able to subscribe (in the pay as you go sense, not in the RSS sense) to enough storage to make cloud backup an option?  The same questions have been swirling around Sky Drive, but cloud storage as a consumer subscription service is still an unanswered question.

Do we have to go through this naming mess again?

Most of the stories on Techmeme today are about a file syncing product, called Live Mesh.  Yet we know that Live Mesh isn’t a product, its a platform.  What happens when new sets of functionality are added?  Will the name change?  Will confusion reign (again)?  Microsoft concentrates on platform, and we’re very impressed by this latest platform offering, Live Mesh.  We think its a game changer.  But Microsoft still doesn’t seem to understand how much flubbing the naming of products, of not having a clear story going in, hurts.  Now when you’re changing the game, having a clear story is tricky.  But Windows Live has less of an impact today than it should because people wrote it off, mostly because of the naming debacle.  Will we have to go through the whole mess again?

Live Mesh, at first glance, rocks.  The model is well thought out, the tools will soon be in place to extend the platform and use it in new and exciting ways.  But Windows Live users need answers to the basic questions first, before we look to the sky.  Hopefully, in the next weeks and months, we’ll be able to look up and see the potential Ray Ozzie is offering us.  For right now, though, our basic needs aren’t being met, and we don’t know that Live Mesh will be providing the answers we need.

When we told you to “pay attention to Feedsync”, we were of course talking about Live Mesh, but what Ray Ozzie is bringing to the table with the Live Mesh Technology Preview, enabled by Feedsync, or Simple Sharing Extensions to ATOM and RSS, is a lightweight, robust, performant, and scalable method for connecting devices, data, applications, and relationships.

In his Channel 9 appearance with former O’Reilly writer and current Microsoft evangelist Jon Udell, Ray Ozzie gets almost giddy when he gets to talk about Live Mesh.  And with good reason, Ozzie has been working on these problems for a long time.  What Feedsync enables for Live Mesh, when it is connected to a mesh of devices, the array of services available to Windows Live users (Live ID, contact store, data storage, etc.), user data, and the relationships between all of them, quickly becomes much more than a really cool way to sync up some files.

In another Channel 9 interview, Windows Live Platform Architect Abolade Gbadegesin describes treating Live Mesh devices in a similar way to how Live IDs are handled.  You have an ID, and now your device has an ID, too.  With it, that device can share what it knows across other devices and to other users.  It can create and store information about relationships, as well as files and file sync.  The Live Mesh Notifier (it was called Live Mesh News internally, and the initial exposure is a news feed not unlike the one on Facebook), can not only display news items about these relationships (Joe just added 3 files), but can potentially expose a lot of rich information about them (show all files added to these folders by Joe).

Our relationships online, and how we connect, protect, manipulate, and store them become much richer and deeper when we consider our devices as part of what we relate to.  Live Mesh will know what computers I use, what files I need, who to share them with, what I’ve modified, what others have modified, and what I’ve shared in a number of complex ways.  This platform (of which the current Technology Preview exposes just a tiny bit) through a simple set of RSS/ATOM extensions has bridged a gap between our online relationships to people, and our relationship to our devices.   When the mesh is connected to devices, Windows Live services, data, and available online or on a client, by managing the relationships between and among them all, it suddenly opens up a whole new world of possibilities.  We said it before and we’ll say it again, pay attention to Feedsync.

We’ve been telling you to get ready for this since last December, and this week, Ray Ozzie and the Windows Live Core team are preparing to unveil their first big project, Live Mesh.  We gave you the rundown on Live Mesh last week: sync devices to each other and the “cloud”, share files and folders, allow remote access to files and programs from another mesh device, or from a “web desktop”, all from one common interface.

So what makes Live Mesh such a big bet?  Isn’t it pretty much like Foldershare, or Groove, or one of the web 2.0 startup offerings?  Those, of course, are good questions.  While we’ve been able to ferret out some information about what Live Mesh is, how it works, and what it does, we haven’t yet seen it in action. Is it just another variation, another attempt at file sync and sharing?  In an email interview with Steven Hazel, Mary Jo Foley asked:

MJF: Foldershare is supposedly a precursor to the mesh architecture/synchronization services Ray Ozzie described at Mix. In your words, could you explain how Foldershare fits in with mesh? Will mesh supersede (and replace) Foldershare?

Hazel: Honestly, I can’t figure out what the heck those guys are talking about.

However we know there are some key differences.  As a Windows Live offering, Live Mesh should be a free download, or at least have a free component (we’re expecting Live Mesh to start out with a 5gb web desktop offering).  Groove, on the other hand, is a $229 install (or a $79/yr subscription) per user.  Foldershare, along with some reliability issues, and shaky functionality, doesn’t provide the cloud based “web desktop” piece.  Other services are either just getting started, haven’t proven reliable, or have been pulled off the marketplace.

Live Mesh is an opportunity for Ray Ozzie and the new guard at Microsoft.  The Live Mesh bet could pay off big if the Microsoft Sync Framework, and RSS shared extensions (or Feedsync) work reliably, quickly, and robustly.  If it works as Ina Fried is hearing, cross browser, and coming soon, cross platform, it could help to signal real commitment to a more open Microsoft.  Internally, there have been rumblings about Ozzie’s ability to ship software, and Live Mesh could help there, as well.

We’ll have a lot more on Live Mesh very soon, and will be bringing you interviews and demos from the Web 2.0 Expo later in the week.  Will Live Mesh prove to be as exciting as we’re thinking?  It won’t be long til we find out.

Yesterday's flurry of activity on the MSFT-YHOO front had so many plot turns that my head is still spinning, but at the end of the day, analysts are still leaning in favor of a MSFT-YHOO deal.  We could breathlessly tell you what we think is going to happen (and indeed I was working up an opinion post yesterday morning), but then Yahoo! announced a trial run of Adsense ads from Google, and more news "leaked" out about a Yahoo-AOL deal (what was it Fake Steve Jobs said about a three-legged race?), and to top it off word got out about a possible partnership with Microsoft and News Corp. (owners of MySpace).  Whew.

So truthfully we have no idea what's going to happen next.  We're going to continue to follow the developments closely (reality television has nothing on these antics!), enjoy the heck out of reading everyone scramble to try and make sense of it all (and feel a little sorry for them).  But generally, until the dust clears a bit, we'll probably try our best to ignore the elephant in the room, and continue to focus on telling you about things we do have a handle on, like Live Mesh ;), a new Live Maps update, lots more to come involving Live Search announcements, and all the best on Windows Live.

In the meantime, check out our MSFT-YHOO pages, where we will continue to tag stories of interest (using del.icio.us and NewsGator), track the latest stock news and prices (using a nice widget from Yahoo!), and compile all the official releases in our Document Timeline (ps. if you have IE8, you can even subscribe to the Document Timeline WebSlice!).