Outside the Lines

Sitting across from his employees and writers Walt Mossberg and Kara Swisher at the D6 conference, News Corp. mogul Rupert Murdoch shared his view on newspaper editing.

"A Wall Street Journal story is touched or edited by 8.5 people, and the story gets longer and longer, and people don't have time for that," he said. "There is not a story you can't get in half the space."

If the whole Wall Street Journal were like Mossberg's column, Murdoch said he would be a happy man, getting some big laughs from the D6 crowd. The 77-year-old media mogul understands the shortening attention span of the planet.

Murdoch apparently isn't fond of journalism prizes. "Stop having people write articles to win Pulitzer Prizes--give readers something they want to read."

Murdoch: Obama will likely defeat McCain
The conservative Murdoch said it's likely that Obama will defeat McCain in the November presidential election. Politicians are despised by 80 percent of the population, and Obama is trying to put himself above it all, Murdoch said.

The tide is against the Republicans, and Obama could overcome the race issue. McCain, Murdoch said, is a friend, patriot, and decent guy, though he conceded also that he is unpredictable, has spent too much time in Washington, and is not great on the economy (which he said is in a recession) or organizationally adept.

Swisher asked Murdoch whom he would vote for, but the cagey Murdoch said he hasn't made up his mind. He said Obama would never give Hillary Clinton the vice presidential job and would want to distance himself from the Clintons. Murdoch described Obama as a "highly intellectual man" and said he wants to meet the candidate. He likes his plan to fix the U.S. educational system, which he called a total disgrace. "I want to know if he's going to walk the walk."

Murdoch predicted that the States will face an international crisis, such as with Iran, that will test out the candidates.

Mossberg asked Murdoch if he had anything to do with the New York Post's endorsement of Obama. Murdoch simply said, "Yes." It's not often that you hear that kind of honesty.

Murdoch believes that a way to solve the energy crisis more immediately than investing in alternative-energy sources such as nuclear, solar and wind power, is to drill for oil off the American West Coast and Alaska. The country "didn't buy Alaska to save a few elk," he said.

Among all the industry titans speaking at D6, the News Corp. chief was the sharpest, though Sony CEO Howard Stringer was the funniest.

Murdoch also revealed the secret to his persistence and success. "I'll keep going, as long as I have my curiosity and thirst for risk."

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Facebook CEO Mark Zuckerberg and his new COO Sheryl Sandberg fielded questions from Kara Swisher at the D6 conference. The pair stayed on message. Zuckerberg has learned to simply state the company goals in answer to almost any question. It shows focus and the savvy of a budding politician. Sandberg brought serious chops to the monetization and marketing discussion.

Kara asked Zuckerberg why he chose to be the CEO, even as the company has grown to 550 people. He sidestepped the question and talked about the company goals--helping people share information, building products, and creating teams.

Zuckerberg offered up that the Beacon advertising program was a big mistake, but it reinforced the point that Facebook needs to give people complete control of their information. In other words, Facebook takes privacy seriously.

Sandberg talked about value in Facebook applications, including those that are whimsical and fun, such as Slide's SuperPoke. Kara asked how Facebook will change the advertising paradigm in the context of those applications. "The larger part of advertising is in demand creation and traditional brand advertising. Facebook has a really unique opportunity to fulfill that message. Users tell us what they like and what they do, and it provides us an opportunity to work with advertisers to provide things that are great for users. We think we can offer real users engagement."

Zuckerberg thinks of Facebook as a technology company, while Sandberg described Facebook as a media company that connects people and advertisers. The ended up connecting their viewpoints. "Technology can speed up the interaction between advertisers and users, and that's really good for users," Sandberg said. Making privacy and advertising work harmoniously will be a major challenge for the CEO and COO.

Zuckerberg talked about changes to the Facebook platform, especially getting rid of the box mentality--user pages littered with applications in boxes on pages. The net effect of the new Facebook platform is that the more engaging applications and those that users trust more will get more distribution, through feeds instead of boxes, he said.

Kara saved the Microsoft question for last. She asked Zuckerberg if he would sell Facebook to Microsoft for $15 billion. "The goal of the company is to execute on the things we talked about before, become more open, and share more information. The end goal isn't to sell the company or IPO. We evaluate how it will help us along the way," Zuckerberg said. Can they sell company without you?, Kara asked. "I don't think so," Zuckerberg responded. Facebook's VCs may have a different view on Zuckerberg's view on exit strategies, but it is refreshing to talk about building value.

Sandberg, who recently made her first visit to Microsoft, said the two companies had a good partnership. "No company can go it alone. We are a small company with 550 people, four years old and not very big," she said.

Zuckerberg told of Google's Sergey Brin and Eric Schmidt coming to his apartment for dinner. He didn't have the proper things to make dinner or enough chairs for his guests to sit. Kara asked him about working with Google. He danced around this question.

"They do a lot of interesting things. It would be good to work with them on something. The thing is Google is such a big company and doing so many things. They are also working social stuff. It would be good to talk to them about some stuff." In other words, we aren't really working with them. However, with all the Google refugees at Facebook, that could change.

Regarding the controversy with Google's Open Social initiative, Zuckerberg said that Facebook is watching how it evolves. "It's really just getting started," he said.

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Yahoo's top two executives came out of their serial and secretive negotiations with Microsoft and Google to shed light on the cloudy future of the company. In an interview Wednesday at D6 with Walt Mossberg, CEO Jerry Yang and President Sue Decker did little to shed light on the negotiations or possible outcomes.

Of course, it wasn't expected that the pair would say anything revealing about the negotiations with Microsoft other than the stock answers Microsoft's Bill Gates and Steve Ballmer gave during their D6 interview Tuesday night.

Yang mostly reiterated what has been said in the public letters going back and forth between Microsoft and Yahoo. On the current state of negotiations, Yang said, "As companies are positioned we have to understand more of what they are proposing to us. We are doing our best to understand Microsoft's interest."

Yang gave indications that he regretted Microsoft's decision to walk away from the negotiating table during the acquisition talks.

"It's like a high school breakup--he says, she says," Yang said. "It's not constructive to go back (over what happened)...I'm mixed about what happened. We all felt and understood a combination done right has a tremendous amount of power and leverage." He also said that there wasn't a single defining reason that caused the the two companies not to reach an agreement.

Decker was more straightforward: "We never got through the price door," she stated.

Yang: Yahoo is not under siege
Yang maintained that Yahoo is well positioned for the future as an independent company, and not getting weak and vulnerable. "The perception of us being a company under siege is just not accurate," he said. "The process has in many ways pulled together Yahoo as a company. It's a real life exercise of crisis management. What we do matters. I think in a way that's what the morale and culture at Yahoo is all about." He added that Yahoo can continue to build great products and move forward and is more ready for the challenges ahead than last year. "The essence of yahoo is being redefined today and making us stronger," he said.

Mossberg probed further, asking why Yahoo rejected the $33 per share offer from Microsoft.

"I understand the situation people are feeling, but at the same time we did not walk away from that proposal, Microsoft did," Yang said. "We are willing to do a deal under the right terms. It wasn't clear to me they wanted to finish the deal. I can't go revisit and take or not take it. I understand our obligation to stockholders from conversations with a number of them. The focus for us is how do we recognize more value for the company soon and position Yahoo to be much more successful in the long term. If there is a way to do it, we'll talk about other alternatives, but we aren't going to do something short term."

Decker added some color on how the business was valued by Yahoo's board. She said that Yahoo has a huge inventory created by 500 million to 600 million users per month. "We think the inventory is undervalued in search," she said, saying that Yahoo's Panama ad system is closing the price gap with Google and that 90 percent of inventory is not search-related.

What is Yahoo's business?
Mossberg asked Yang how he defined Yahoo's business. The Yahoo co-founder responded, "I think of Yahoo as we have to be incredibly relevant and useful to users. You have to start your day at Yahoo. We want people to come to Yahoo first thing in the day and multiple times a day. That is an incredibly powerful position, consistent with our roots and ripe for innovation."

Yang came up with a shorter elevator pitch after his more lengthy opening statement: "The starting point for people to get the most out of the Web is our dream and aspiration." He later said, "If (you) look at that base of people (500 million Yahoo users per month), we need to be relevant to those people as they grow up on the Web."

He noted that Yahoo can't be all things to all people, and has to be more focused on how it builds products going forward.

Yahoo's open social strategy
Then Decker chimed in to really get to the heart of what will make Yahoo tick. Yahoo doesn't have a problem in reaching users. It has over half a billion users per month, 250 e-mail users, and 10 billion social connections across mail, instant messaging, Flickr and other Yahoo properties.

She gave a pitch for Yahoo Open Strategy, which will ignite the social graph that is latent within Yahoo, and which is a key to the future of Yahoo.

The first fruits of Yahoo Open Strategy will appear later this year, and will include a development environment for several properties, a social "activator" and graph engine, an events engine, and a single profile for users, according to Yahoo CTO Ari Balogh. The activator engine handles the combining of different relationship groupings, such as the Yahoo Mail e-mail address book, Yahoo Messenger contacts, Flickr friends, Yahoo 360, and Yahoo Mash.

The Google question
Regarding the controversial deal in which Google would sell ads on Yahoo, Yang said, "In the last public statement we said we conducted a test with them and have an understanding of what they can do for us and what we can do for them. It could be a unique arrangement, but we haven't talked about it. Yahoo has the ability to remain very competitive in the advertising space and the flexibility to partner with Google, but that has not been understood in the marketplace. Until we get to something to talk about, it's all speculation."

Mossberg noted that Google is continuing to gain search share. The search game is pretty early, Yang said, especially the aspect of social search, people passing around and sharing search information. Yahoo will differentiate its search, Yang seemed to say, by leveraging its 500 million user base.

Yang: I am the best person to lead Yahoo
Kara Swisher asked why Yang and Decker should be in their respective positions given the performance of the company over the last few years. Decker responded, "As a company we have made a few mistakes, and Jerry and I are excited to try to address them." She admitted that Yahoo lost touch with users somewhat as it pursued more of an applications strategy. "We lost the core focus around the core ecosystem of users, advertisers and publishers."

Yang also responded: "I am a co-founder and involved in company the whole time and probably not CEO of another company unless I start another company. I do think I am the best person to lead Yahoo...not only because I bleed purple, bleed Yahoo...there is a big opportunity for Yahoo to fulfill. It's my time to take Yahoo to the next level, that allows our audience to do what they can't do anywhere else except on Yahoo." He concluded that he and Decker are starting to show that Yahoo can be on a "path to being a very different entity."

The summary
Yang and Decker have a strategy--the Yahoo open and social strategy--but they are still in crisis management mode and under stress to resolve uncertainty around the future of the company as it relates to Google, Yahoo, and shareholders. It could be a long and frustrating summer as the continuing saga unwinds. Most importantly, Yahoo has to execute on its rewiring of its services and new display advertising solution. Without those pieces, the value of Yahoo will be in decline, and the $33 per share Microsoft offer will be looked upon as a major error in judgment by Yahoo's board.

The Yahoo video
Prior to the interview, Yahoo showed a humorous video, following a tradition of Microsoft at industry events.

Legendary investor Warren Buffet let Decker in a on little secret. Buy low, sell high. Venture capitalist Mike Moritz said Yang and his co-founder David Filo should go back to Stanford. Charley Rose told Yang he should dress in earth tones and lose the glasses to close the deal, so to speak. Sony CEO Howard Stringer suggested that Yang get into electronics. Intel CEO Paul Otellini gave Decker ideas for marketing herself, such as a musical theme, and Michael Dell told Yang how best to deal with Mossberg in interviews. Cisco Systems chief John Chambers was selling Yang on his $300,000 Telepresence product. Mark Zuckerberg said he should sell 1.6 percent of his company to Microsoft. At the end, Microsoft was called...

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Speaking at the D6 conference Barry Diller said Google is irrelevant to his Ask.com business and explained his quest to spin off five public companies from his collection of companies and 63 brands.

As chairman and chief executive officer of IAC, as well as chairman of Expedia, Diller oversees brands including Home Shopping Network, Ticketmaster, Lending Tree, Ask.com, Match.com, CitySearch, and Evite.

On August 1, IAC will become five separate companies--HSN, Lending Tree, Ticketmaster, Interval, and a "new" IAC, which will be a series of businesses naturally related to each other, Diller said.

"We are a mini-multiple business organizing principle in the new IAC," he said. For example, Match.com and Ask.com will be part of the new IAC.

Diller also discussed the acrimonious lawsuit with partner Liberty Media and John Malone that stalled the move to breakup IAC into several companies. "It was a horrible thing, putting our lives in the hands of a judge in Delaware. It was very difficult and painful and in fact what it was about wasn't any of the bomb throwings from various sources. It was about whether I had the rights over the shares," Diller said. "It was a three-month clump out of my I could have done without." Diller won the right to split up the company. "We have expertises in certain areas where we really have edge. That's the blinders we will use to start new things," he said.

Diller was able to fend off Malone, and also thinks he is doing all right versus Google.

"Ask is successful, and has gained in search more than anyone else but Google," he said. "The market is not going to be controlled by one party. Google is irrelevant to us. It's a different competitive set issue (than Microsoft's). If you are after scale and arguing rights that you are not a loser in the business and other business initiatives, that's one thing. I believe our product is in most respects better than Google and it gives you an ability to make a claim...If you keep at it, have good purpose and a good product, it will stand the test of time. At some point Google will not live ever after with 60 or 90 percent of market."

That may be true, but it's hard to imagine Ask.com getting more than 5 percent share no matter what it does. Google is irrelevant in the sense that Diller doesn't intend to compete with Google head on as Microsoft does.

He was asked about Microsoft's quest to acquire Yahoo and thought that the bid made sense as a way for the software giant to compete with the rise of Google in search. "It seems to me that if you fire a gun, making a hostile bid, the bullet has to land in the heart or can't imagine firing it off," he said. Microsoft missed the direct hit and Yahoo was able to escape, at least for now. He indicated that Yahoo's obligation to long term shareholders will be to get a higher share price or buyout than what Microsoft offered. He also appreciated the tenacity of Microsoft. As Steve Ballmer says, Microsoft will keep "coming and coming and coming."

Regarding Facebook, Diller compared the social network to the princess phone from 30 years ago. He didn't elaborate on the comparison, but the princess phone was a status symbol of teenage communication coolness. Facebook has great tools to draw users in and keep them engaged, he said. "Passivity won't go out the window but will go pretty far down," he said.

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CARLSBAD, Calif.--Amazon.com founder and CEO Jeff Bezos kicked off the morning proceedings here at D6 after a night of polite carousing by industry luminaries. During the interview with D co-host Walt Mossberg, Bezos announced a streaming-video service and explained his foray into hardware with the Kindle e-book reader.

On the subject of video and music delivery, Bezos said, "We are working on a new version of video-on-demand, a for-pay streaming service we will release in the next couple of weeks. The streaming service will start instantly, and it's a la carte, for pay."

Regarding competing with Apple's iTunes services, Bezos said it is clearly in the self-interest of music companies to have competitors.

The Kindle is clearly a passion for Bezos. It follows on his love for selling books online, which was the origin of Amazon, and developing a new market for digital content delivered over wireless networks.

"We base our strategy on customer needs instead of what our skills are...Customers will eventually need things that you don't have skills for, so (you) need to renew yourself with new skills," Bezos said. If Amazon doesn't extend into new product categories, the company will get outmoded, he said.

Bezos wouldn't disclose Kindle sales. "On a title-by-title basis, with 125,000 titles for Kindle, and you look at Amazon's physical sale of the same books, Kindle sales are more than 6 percent of the universe of 125,000 titles," he said. Amazon reduced the price of the $399 Kindle by 10 percent this week.

While Bezos said he was happy with the sales of the Kindle, the price cut and the heavy promotion of the device on Amazon's site could mean sales aren't spectacular. The Kindle could be a meaningful financial component in Amazon's business, Bezos said, but he didn't put a figure on the Kindle's contribution to annual revenue.

Regarding the fate of physical books, Bezos said the vast majority of books will be read electronically. Just as horses haven't gone away, books will be around, he quipped. "We see Kindle as an effort to improve the book, even though it hasn't changed in 500 years," he added.

"You can't ever outbook the book, so you have to do things that you can't do with a book, such as in-stream dictionary lookup, changing fonts, and wireless delivery of content in 60 seconds," Bezos said. "We have to build something better than a physical book."

Bezos said he did research into the smell of the book--glue, ink, and mildew. "We can never capture that," he said, adding that the container is not important; the narrative is. He wants to make long-form reading more frictionless so that people read more.

Mossberg asked Bezos about adding new features to the Kindle and its utility as a Web browser.

"There are things that fit into the Kindle form factor and don't interfere with the purpose of the device. But the device is not a cell phone or bunch of things. It should be able to browse the Web," he said. "If you were trying to build the perfect Web-browsing device, you wouldn't use electronic ink. It's not the right display technology for high-quality Web browsing."

"You might say the Web is the most important book in the world," he added, but that's not something the Kindle is designed to read as well as other devices.

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Evri has a new twist on content navigation and discovery. Debuting Wednesday at D6, Evri is not a search engine, according to CEO Neil Roseman, but a "data graph of the Web" that leads to "incremental content engagement."

"What doesn't work well is when you get to other places on the Web," Roseman told me. "We read sentences, extracting the subject, objects and verbs, and map to other content on the Web." Evri uses entity extraction, natural language processing, statistical analysis, and other technologies to create relevant connections based on meaning and concepts without human intervention.

Evri creates profile pages, which are like search results, that include a variety of lenses for an entity, such as top connections (entities most closely associated with the target entity), people, location, products, organizations, and events.

The profile pages are somewhat like what you get from Mahalo, which is human-powered, but closer to Powerset, Hakia, Twine, and and other new services that leverage semantic and natural language processing technologies to map concepts and meaning rather than keywords.

Evri also is planning to offer content publishers widgets that produce related content for a particular page, similar to what Sphere (recently acquired by AOL), Inform, and Aggregate Knowledge provide.

Roseman is focusing Evri as a consumer product. He spent 10 years at Amazon working on several projects, including searching inside books, the MP3 store, and the server side of the Kindle reader. Currently, Evri has parsed less than 1 percent of the Web, working with 20,000 to 30,000 top-level domains and some full-text providers. "Once we distribute the widget to content providers, we will incrementally add more to our deep parsing, and figure out what drives the most page views on a daily basis and build the network over time," Roseman said.

Evri is expected to go into beta testing in a month, Roseman said. Some of the processing will be done via Amazon's Elastic Compute Cloud facility. He noted that scaling to cover more of the Web is very hard. Evri will be ad-supported and will not charge content partners. "We will give partners all the revenue," Roseman said. "We want to build the network and get people to use Evri."

Seattle-based Evri has 36 people, mostly engineers, and is wholly funded by Vulcan Capital. So far Vulcan has poured about $8 million into the company, including the acquisition of some technology and engineering talent from Insightful, Roseman said. The company plans to go for Series A funding round this year.

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Bill Gates and Steve Ballmer reminisced about 28 years of working together and addressed a number of topics, including Vista, Yahoo, Google, Windows 7, and search, in an interview with Walt Mossberg and Kara Swisher at D6.

Following are the videos from the Gates-Ballmer interview. Full coverage of D6.

Part I

Part II

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At a reception prior to the start of the D6 conference, Bill Gates held court among a throng of reporters. He explained some of the specifics of his July 1 "retirement" from daily duties at the company he founded. Gates said he would invert how he spends time today. Instead of spending 80 percent on Microsoft and 20 percent on the Bill & Melinda Gates Foundation, he will spend 20 percent of his time on Microsoft issues and the remainder on his foundation work.

Gates, who will remain chairman of Microsoft, said he will spend two to three days at Microsoft, where he will have an office, and two to three times that amount of time writing, thinking and working on a variety of pet projects, including the next generation Microsoft Office, natural interfaces (such voice and handwriting) and search. "I'm very involved in search, the internal development," Gates said. "We will build the world's best search." He didn't say with or without Yahoo, but that has been the Microsoft message.

Regarding the courtship of Yahoo, Gates said it wasn't a big deal in the grand scheme of things. "When we bet on the graphical interface, that was way bigger than any acquisition," he said. It took Apple to show Gates and his team the way, however.

During the D6 interview with Walt Mossberg and Kara Swisher, CEO Steve Ballmer said: "Look, we made a bid for Yahoo. It was out there for three months, and there was difference between bid and ask. We thought we could accelerate our business. We were going to be financially disciplined about it. We walked away. We are talking with them about other ideas, but we are not rebidding on the company. I won't comment on what we are talking about." Microsoft has been in talks with Yahoo about some kind of business deal for just search.

"We have a good team and we are patient," Ballmer said about Microsoft's search efforts. "People in our industry are way too impatient. Great things rarely happen overnight." He then expressed a core component of the Microsoft DNA--tenacity. Microsoft will keep coming and coming, as he likes to say. And Google is the target.

Regarding Ballmer not having him around as much, Gates said: "Steve is a founder just like I am. He came when the company was a rounding error. We have created a completely new company many times together." When Ballmer took over as CEO about 8 years ago, the two had to learn how to work in their different roles. "Steve wasn't used to explaining why he does things as I was, such as why you time out (no longer have confidence in them) on a person. As No. 1 you need to be able to articulate that."

During the interview, Gates said that he has been the junior partner for the last 8 years.

Gates also pointed to Microsoft Fellows and $6 billion annual research budget as a key for Microsoft's future. "I am betting on the quality of Microsoft Research," he said.

Gates also said he would work on education, agriculture, and other initiatives that interest him. He is also involved in a project to map all of Africa, using Microsoft resources as well as contributions from Gates himself and his foundation.

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The sixth version of the D: All Things Digital conference will begin Tuesday night with Bill Gates and Steve Ballmer onstage. The two legends of Microsoft will offer the first public peek at Windows 7, although Ballmer told me they would only show a little bit of the user interface.

It will be a very early "positioning" peek given that Windows 7 isn't due until the beginning of 2010. As CNET News.com's Ina Fried reported from her interview with Window chief Steven Sinofsky, Windows 7 is not a new kernel. Ballmer said that doing too much with the Windows kernel in Vista has been a source of incompatibilities and displeasure among users, and Microsoft wants to avoid that kind of problem.

Sinofsky described the Windows 7 kernel evolution as follows in the interview:

We're very clear that drivers and software that work on Windows Vista are going to work really well on Windows 7; in fact, they'll work the same. We're going to not introduce additional compatibilities, particularly in the driver model. Windows Vista was about improving those things. We are going to build on the success and the strength of the Windows Server 2008 kernel, and that has all of this work that you've been talking about. The key there is that the kernel in Windows Server '08 is an evolution of the kernel in Windows Vista, and then Windows 7 will be a further evolution of that kernel as well.

The speakers at D6 also include Jeff Bezos, Michael Dell, Mark Zuckerberg, Barry Diller, Howard Stringer, Jeff Bewkes, and Jerry Yang, among others. However, don't expect a group hug between Ballmer and Yang, who may be in the audience tonight for the Gates-Ballmer show.

Stay tuned for more coverage.

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