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This one seems to have been overlooked by everyone on techmeme.com, and even Rafat Ali at PaidContent missed it on Friday, but picked it up today: Interpublic Group, the global advertising conglomerate, has done a deal with Facebook — the social networking site aimed at university students that is the hottest thing next to MySpace.com.

Earlier this year there was an article in Business Week magazine that said Facebook’s frat-boy founders had turned down offers of $750-million for their company, and were looking for future offers in the $2-billion range.

This number was scoffed at by many, including former tech analyst and blogger Paul Kedrosky and some observers said that the Facebook guys were either trying to get publicity or their initial investors were trying to ramp the price up. The company later said that it had no intention of selling, and that the $2-billion figure didn’t come from Facebook.

The Interpublic deal, however, tends to support that rather large valuation (at least in theory). According to an article in Mediaweek magazine, the agency has agreed to buy advertising worth $10-million on the site, in return for one-half of one per cent of the company.

If you do the math, that would imply a valuation for all of Facebook right around the $2-billion mark. Crazy? Perhaps. But then, no one thought Rupert Murdoch would ever pay almost $600-million for MySpace, or that eBay would buy a money-losing Internet phone company for somewhere between $2.4-billion and $4.1-billion.

Update:

Josh of FeelingBullish.com makes a good point in the comments about the true value of this deal, since Interpublic gets advertising for their $10-million as well as a stake in the company. And a commenter over at PaidContent made a similar point at greater length, which Rafat posted in full, and it is well worth reading — the idea being that the deal actually seems kind of desperate, and perhaps designed to bolster the $2-billion valuation idea.

Update 2:

SiliconBeat has more info here — it seems the advertising deal and the ownership stake were two separate deals, not related at all, and npoo monetary figure was given for the purchase of the .5 per cent share, so no extrapolations can be made about valuation. Darn.

Poor old Nortel Networks — or “No-tell Networks,” as one wag dubbed it after the fourth or fifth time the company had to restate its earnings. It was bad enough when the company flamed out so quickly after becoming the king of the Toronto Stock Exchange (and of many people’s investment portfolios), but then that was followed by the repeated financial restatements, the firing of senior executives, and so on. Then there was the whole Bill Owens fiasco, in which the former Navy officer did virtually nothing to move the company forward, and in fact arguably set it back (by hiring two senior Cisco executives and then quickly showing them the door).

The end result is that Nortel has been unable to make much headway in the telecom or networking equipment market, and that hasn’t changed much lately, despite the best efforts of Mike Zafirovski, the new CEO. Now, the company finds itself even further behind, with the reported merger of the networking arms of Finland-based cellphone giant Nokia and German telecom equipment vendor Siemens AG. The deal as described would create a $30-billion equipment supplier that would rank up there with Lucent/Alcatel. And it removes the possibility of Nokia merging with Nortel, an idea that was recently floated by analyst Gus Papageorgiou.

It’s not surprising that Nokia would choose Siemens over Nortel, if it ever even considered a similar merger with the Canadian company. A history of financial restatements, allegations of improper behaviour by executives, lawsuits flying left and right including class-action lawsuits, and products that have fallen further and further behind the competition over the past few years. Not a great bio if you’re looking for a hot date with one of the telecom industry’s leading players. Nortel has raised even more question marks with some of its recent moves, including a short-lived partnership with China’s Huawei.

So now it seems that a merger with Nokia is off the table, and Siemens is also off the market. Who does that leave for Nortel to pair up with — Ericsson? Motorola? Mark Evans has some more thoughts here. I think Mike Z. had better put on his dancing shoes and start thumbing through that little black book.

“Gates leaving Microsoft” makes for a nice headline, and plenty of speculation and commentary over at techmeme, but it doesn’t really bear any relationship to reality. For one thing, Bill isn’t leaving his “day-to-day role” (whatever that really is) for another two years or so, and in any case he will likely remain chairman of Microsoft until he passes away or is accidentally crushed by a giant bag of money.

For a glimpse of what the announcement actually means in concrete terms, it’s always instructive to look at the share price. What did it do? The square root of you-know-what. Its movement on the news wouldn’t even qualify as a rounding error. In other words, it’s neither good nor bad because nothing much is going to change. Microsoft is still spinning off lots of cash, but seems otherwise “infirm of purpose,” as Lady Macbeth said of her husband.

I was talking about this latest development with Paul Kedrosky — who as some of you may know is no friend of Steve Ballmer’s — and he said that he found the phrasing of the announcement very interesting, in that Ray Ozzie and Craig Mundie were both elevated to higher positions (with Ozzie taking over Bill’s title as “chief software architect”) and Ballmer got nary a mention at all, not even lukewarm praise.

Is that a signal that Bill isn’t too happy with Steve’s stewardship of the great ocean liner known as Microsoft? Perhaps. It’s true that the software giant continues to spin out great gobs of cash flow almost without even trying (which is why I think it should become an income trust) , but it’s also true that Vista keeps slipping, Microsoft seems to be pursuing a shotgun strategy — if any — when it comes to the Web, and MSN continues to be an also-ran.

So what should Bill do? Fire Steve Ballmer and put Ray Ozzie in charge. That would shake things up. Unfortunately, in many ways, Microsoft is too comfortable and too handcuffed by its Crown jewels — Windows and Office — to do anything that interesting.

You would think that someone like me — being a journalist and all — would have a pretty good idea what journalism is and what it isn’t. But I have to confess that something like the new Netscape beta created by Jason Calacanis and his team, which launched this morning and promptly caused an implosion of commentary on techmeme, has me stumped.

In a way, it’s a lot easier to dismiss Digg and its ilk, as Nick Carr and others have been more than happy to do, slamming it as the “hive mind” and all that sort of rubbish. But Jason’s rather brilliant move (I hate to add to the already legendary Calacanis ego, but I can’t help myself) is to add blogger/journalists who contribute comments, links and in some cases reporting to the stories as they develop. Okay, calling them “anchors” is dumb, but the idea is compelling. Take the stories people are talking about, add commentary and links, interview some people to advance the story — that sounds like journalism to me.

But is it “real” journalism? I don’t have a clue. It certainly is interesting though — and things are going to get even more interesting when Digg launches its revamped site later this month, which will extend the Digg/Slashdot model to other types of news apart from just technology. Will it be as successful, or is there something about tech and the geeks who follow it that makes something like Digg or Reddit or Slashdot only useful for technology-related news?

There are other sites in the same kind of space Jason is trying to fill, including Gather and Newsvine.com, but it’s hard to tell how those services are doing, or whether they have what VCs love to call “traction.” One of the things that Netscape brings to the table — and it’s not inconsequential by any means — is the tens of millions of existing AOL ssubscribers (although they have been fleeing by the millions every year), and the 800 million page views or whatever they generate. That’s no guarantee of success, however.

There are plenty of things not to like about the Netscape site, including all the annoying ads and the fact that the story links make you go to another Netscape page, and then further disguise the link to the actual story, which is the sort of roach motel crap that people rightly hate. But still, all in all I would agree with my friend Rob Hyndman and IPDemocracy that it’s an interesting effort, and one worth watching.

And I will just add in passing that the last time I looked, Jason Calacanis had posted a total of more than 120 comments on stories at Netscape, many of them responding to criticisms — and he has posted many more on various blogs (including Rob’s). You can’t accuse him of resting on his laurels.

If you’re a computer nerd — or even just interested in the guts of what Google does and how it does it — there’s a great story in the New York Times today about the new server farms the search engine company is constructing on the shores of the Columbia River in The Dalles, Oregon. Two are built already and a third has received a permit. They are as big as two football fields, and each one has giant cooling towers four stories high attached to the end, in order to keep the massive farms cool as they search for all that porn information.

Microsoft and Yahoo are apparently building their own giant server farms upstream in Wenatchee and Quincy, Wash., which means that the Oregon-Washington region will likely need a few extra nuclear plants or dams or something pretty soon. Martin Varsavsky of FON says that when he asked Larry Page what the main factor limiting Google’s future growth was, the gazillionaire said it was electricity. The Times gives the latest estimate of how many servers Google is currently operating at its 25 locations around the world: about 450,000.

That figure has more than quadrupled since 2004, when Google’s server operation was already estimated to be one of the world’s most powerful distributed supercomputers. That’s a mind-boggling number. And based on estimates of the power that half a million servers would consume, that means Google’s electricity bill is likely somewhere between $50-million and $100-million every year — and growing

After paying somewhere between $2.6-billion and a gazillion dollars (okay, $4.1-billion) for Skype about nine months ago, eBay finally seems to be getting around to doing some of the integration that everyone was talking about at the time. One of the most interesting possibilities is Skype-Paypal integration, as seen in a screenshot at Om’s blog — which in turn came from Random Good Stuff via a German blog.

Developers were apparently shown a right-click menu with the option to “send money (via PayPal) and “request money.” Random Good Stuff mentions the obvious possibility: Web-cam porn outfits asking you for money via Skype and PayPal. But at least eBay is starting to show us some synergies between it and Skype.

There’s another obvious one as well that is in the works: a SkypeMe button that sellers can attach to their profiles in eBay. But several major questions remain: Will enough sellers want that feature, or will it be an annoyance? And won’t it just encourage sellers to close transactions outside of eBay? And are these integrated features worth $4.1-billion?

Update:

Someone from 21talks.com points out in a comment that the PayPal functionality has already been announced, which was covered by their site and also by SkypeJournal. Thanks for that, Nuno. That makes eBay’s announcements yesterday somewhat less impressive.

I sort of missed this one when it first came along a few days ago, but I happened to come across a video clip of PC Magazine columnist John C. Dvorak from the VloggerCon video-blogger conference, in which the notoriously provocative pundit describes his approach to column-writing. This clip was apparently filmed by Dave Winer, himself a fairly notorious Internet pundit, although of a different sort. It then made the rounds of Slashdot and Digg.com and YouTube and so on.

If you watch the clip, what you see is John Dvorak laughing and joking about how he deliberately writes things that he knows will piss off Apple fans, and then responds to their shouts of protest by pretending to be flabbergasted that they believe the things they believe, which makes them even madder — all of which drives his readership and traffic numbers through the roof. Then he jokes about how he often completely changes his opinion 180 degrees, which makes traffic go even higher.

Dave Winer describes this as Dvorak “explaining how he lies, knowingly and repeatedly, in his articles about Macs, and therefore has no integrity as a supposed award-winning journalist,” which I find almost mind-bogglingly disingenuous, not to mention inflammatory to the point of bordering on libel. At the time he originally posted it, it sounded to me like Dave knew that Dvorak was joking — or at least intentionally overstating his approach for effect and laughs. In other words, he was doing exactly what he does in his columns.

The fact that Dvorak does this is hardly news. Wired magazine wrote about it more than a decade ago. Rex Hammock describes Dvorak as a classic troll, and says he thought the video was funny (which it is). As I tried to explain in a comment on Scott Karp’s blog at Publishing 2.0, these kinds of techniques are a classic columnist gambit– want to get lots of traffic and lots of letters? Say something deliberately inflammatory.

Is that a strategy that can backfire? Definitely. But if you just want to get traffic and sell books, it’s hard to see the downside — as Ann Coulter and Bill O’Reilly and others continue to prove. If Dvorak were a reporter, then Winer’s criticisms would be valid, but columnists are hired for their opinions, not their grasp of the facts.

Update:

Dave has a new post about Dvorak, in which he mentions people he calls “troll spammers,” whom he refuses to link to. Is that a reference to yours truly? Hard to say. I will note that someone calling himself Pork Pie McMasters left a comment here, which you can see below, in which he says “Hey schmucko — it’s not libel if it’s true.” The IP address for the comment resolves to a Comcast user in the San Francisco Bay area (which is where Dave lives). A concerned neighbour, perhaps? One more thing: there’s a Wired article that makes for interesting reading about Dave, from 2001, in which he is described as having “a signature formula for professional weblog-rolling: Mouth off first, loudly, and often.”

Scoble says that “great journalists call,” so I tried Om Malik’s number a bunch of times, but it’s been busy for a long time now — which could mean that lots of other people are calling too, to try and confirm the latest rumour. In the wake of the Scobleizer’s departure from Microsoft, the word in the Valley is that Om has gone solo and has taken funding to turn gigaom.com into a full-time job. “Eating his own dog food,” as the internal memo from Business 2.0 magazine puts it.

I know we’re supposed to wait for confirmation on these things, but hey — I figure Om would expect nothing less than to have his story broken by someone else. That’s how journalism works. Besides, Paul already mentioned it, and that’s good enough for me (and so did Steve Rubel). If true, I think it’s great. Om is a super guy and a great journalist — and was a great keynote and panelist at our mesh conference last month, even if I did have to delay a panel for him because he was outside having a smoke and making some phone calls 🙂 All the best, Om.

That makes three now — Tara going out on her own, Om going solo (although with a contributing editor gig at Business 2.0) and Scoble joining a podcasting startup. Is this a sign of a bubble? For all their sakes, I hope not.

Update:

Well, as most people know by now, Om has confirmed it (and given props to Valleywag’s Nick Douglas for the scoop besides, which is nice of him), and he sent an email out at about two in the morning to some of us — thanks for that Om.

Gilda Radner: New Shimmer is a floor wax!

Dan Aykroyd: No, new Shimmer is a dessert topping!

Radner: It’s a floor wax!

Aykroyd: It’s a dessert topping!

It may not be quite as confusing (or funny) an issue, but for some reason the debate over whether Google is a media company or a technology company made me think of the old Saturday Night Live skit. In case you never saw it (or like me, your memory is going), Buck Henry eventually came in from offstage and said “Hey, calm down you two — new Shimmer is both a floor wax and a dessert topping.”

My friend Scott Karp at Publishing 2.0 is quite right to be aghast that anyone would think Google isn’t a media company — after all, about 96 per cent of its revenue comes from advertising, which is something we all associate with media companies. And John Battelle makes a similar point, for which he gets props from none other than Henry Blodget himself, the former Merrill Lynch tech-analyst kingpin, who notes that “you are what you sell,” and Google sells advertising.

Let me play the role of Buck Henry here for a moment. Google is both a media company and a technology company. Let’s face it, the fact that the company sells advertising (a whole lot of advertising, mind you) is really only part of the picture. The reason Google managed to become dominant in that field in the first place is its search algorithms, which are based on proprietary technology.

Does Google’s ad business involve anything proprietary, anything that other companies don’t offer? No. But its technology does. If anything, it is more of a distributor of media than it is a media company, as Rex notes here. If anything, all this debate underlines is how much those two businesses are changing, to the point where it’s difficult to tell what fits in which category and what doesn’t.

(P.S. My thanks to Paul Kedrosky for his inspired use of movie dialogue as an opening gambit for a blog post, which is where I got the idea).

By now, pretty much everyone has heard of Rocketboom — the “vlog,” or video blog, or whatever you want to call it has an estimated 300,000 viewers a day, which is more than plenty of mainstream TV shows. What started as a cable-access style show with part-time actress Amanda Congdon sitting in front of a plywood desk and a map of the world has become a gigantic success story, with correspondents around the world. As if to illustrate how far the show has come, Amanda recently had a one-on-one interview with George Soros, the legendary billionaire fund manager.

I had a chance to chat with Rocketboom co-founder Andrew Baron during the mesh conference I helped organize in May — he was on a panel about the future of broadcasting — and he had some interesting things to say about his approach to advertising, and how Rocketboom was getting pitched by everyone from General Motors on down, but he wanted to keep the ads separate from the video content rather than inserting ads into the stream (as most of the advertisers seemed to want). A nice position to be in, I thought, where you can turn down millions of dollars in advertising and know that there is more just around the corner.

Now comes word from Robert Scoble — the now ex-Microsoft blogger — that Amanda and Rocketboom are making about $85,000 a week in advertising revenue, or about $4.4-million a year (and that figure is likely growing rather than shrinking). That’s an incredible figure for something that is still a relatively small operation, and less than two years old, as is the 300,000 viewer figure. Do you think any traditional TV industry types are interested in those numbers at all? You better believe it. For what it’s worth, Markus Frind of Plentyoffish.com — who says he makes almost $500,000 a month from AdSense on his dating website — doesn’t believe the talk about Rocketboom’s revenue.

According to Tom Foremski at SiliconValleyWatcher and Andy Plesser at Beet.tv, the guy who is arguably Microsoft’s most famous person — at least as far as the blogosphere is concerned — is leaving the company. Robert Scoble, also known as the Scobleizer, is reportedly heading to podtech.net to be its corporate evangelist. Tom says that Scoble wasn’t happy working at Mister Softee, in part because they weren’t interested in paying for all his travels to conferences.

I’m with Vinnie Mirchandani on this one — I think it would have been smart to try and hang onto the Scobleizer, and maybe even cough up the one-thousandth of one per cent of daily cash flow that his travel budget might have represented. Flack or not, corporate shill or not, I think he has single-handedly done more to humanize Microsoft than all the millions of dollars spent getting Bill Gates to kiss babies or hug orphans or whatever they do to make MSFT seem less like the Borg.

Update:

Scoble has posted a confirmation of his move, and goes on to counter the rumours about concerns over his travel budget and lack of support from Microsoft — totally not true, he says. He also says they “moved heaven and earth” to keep him happy, but he decided to make the move anyway. “It’s a rapidly-evolving part of my life,” he says. “I just made this decision and it got out before I was completely ready to talk about it.” Best of luck to him.

I’ll admit that I’m as much of a fan of the contrarian argument as anyone — maybe even as much as my buddy Scott Karp over at Publishing 2.0. But I think he and some others are a little too quick to congratulate Seth Jayson of Motley Fool for his insight into how Google is “killing the Internet,” as the Foolish columnist puts it.

The first thing that bugged me about Seth’s column wasn’t that he blames Google for all the spam-blogs and other crap on the Internet, it was the fact that he started off with a crack about all the insider stock selling at the search company — and he comes back to it at the end, as though all those insider sales are a clear indication that Google is pulling one over on the stock market. This one has been tossed around a fair bit since the news came out that Google’s insiders sales accounted for about 51 per cent of all the insider selling in the Bay area in the first quarter.

There are a couple of problems with that line of argument, however, and the first one is kind of obvious: Who in their right mind wouldn’t sell some of their stock if it had gone up by more than 500 per cent? And the other problem with the argument is that the vast majority of those massive share sales by Eric Schmidt and Larry Page and Sergey Brin were pre-programmed long before Google’s stock rose to the heights it is at now. If you look at the insider transactions in Yahoo Finance, you will see the words “automatic sale” beside almost every single one of them.

Don’t get me wrong. I think Seth and others have a point that Google’s click fraud problem could be larger than many investors (or advertisers) expect. But it’s stretching things to say the company is somehow killing the Internet. I remember what search was like before Google came along, and it is a hell of a lot better on balance. The volume of junk mail doesn’t mean the postal system is broken — it just needs to be managed better. And all those insider sales prove exactly nothing.

Back in the good old days of traditional media, when newspapers ruled the world and editors were a law unto themselves, the Letters section of the paper was what passed for interactivity with readers. Anyone could write a letter expressing their thoughts on an issue, mail it to the newspaper, and if they were lucky their letter (or part of it) would get published. The exact process by which certain letters were chosen and others discarded was a mystery — just one of the many mysteries of the newspaper business. And let’s face it, lots of journalists liked it that way.

The old ways are getting harder and harder to maintain, however. For a good illustration of how that is happening, look no further than the recent dust-up between General Motors and the New York Times over a column written by Thomas Friedman, which Mike at Techdirt summarizes here. Like many columnists, Friedman went a little overboard with the colourful rhetoric when he was describing GM — calling it the equivalent of a “crack dealer” and so on — and needless to say, GM wasn’t impressed. So they wrote a letter to the editor. And that’s when things started to get interesting.

The Times balked at the letter idea, at first because it was too long — a fair enough point, since the letters section isn’t really the place for a 500-word essay from a company spokesperson. Then, however, things degenerated into a debate over the word “rubbish” and whether that was appropriate language for the letters section (the Times wanted to change it to “We beg to differ” and then to “Not so.”) So what did GM do? They wrote about the whole affair on a GM blog — and included the text of the emails.

As Jeff Jarvis notes, this all makes the Times look not just arrogant, but woefully clueless about how the Web has changed the balance of power when it comes to traditional media — just as clueless as the reporter who wrote a series of emails to Mark Cuban not that long ago and then watched as the billionaire posted them on his blog for everyone to see. As Tom mentions here, the Times is used to having voice, not in giving voice.

Should the Times have caved in right off the bat and let GM run a 500-word letter defending itself? No. But it should have been smart enough to know that treating the company the way it did over a simple word like rubbish (which InOpinion notes has been used many times in the NYT letters section) would backfire. The Letters section is no longer the only sandbox that readers (and advertisers) can play in.

Well, you know that blogging is getting pretty advanced when even old geezers like Pete Townsend of The Who are doing it. I came across a post on Fred Wilson’s blog a little while ago (Fred is a venture capitalist, but he spends most of his time writing about music) that mentioned his friend Tom Watson got a comment on his blog from Pete, the legendary lead guitarist for The Who.

Pete, in turn, was moved to comment on Tom’s blog because Tom was the first to post a comment on the rock icon’s recently revived blog The Boy Who Heard Music. As Pete noted in the post restarting the blog:

“If you visit my website at wwww.petetownshend.com and check out my diaries you will see that I am posting items about the good and bad things going on around me at such a busy time, and I mention the fact that a lot of people have tried to reach out to me. Hopefully this Blog will provide a way for that to happen.”

Pete isn’t the only music legend blogging either. Another one I came across recently was Thomas Dolby, the electronic music pioneer whose iconic song She Blinded Me With Science is still a favourite of mine. In true blogosphere style, he wasn’t blogging for more than a few weeks before he got into a spat with Kevin Federline (Mr. Britney Spears) over a sample of Dolby’s that the alleged musician used in a song without credit.

And that’s not all — there’s Bob Mould from Husker Du, artistic Renaissance man David “Talking Heads” Byrne, Rivers Cuomo from Weezer, and of course, Canada’s own Barenaked Ladies.

Michael Urlocker, a former Bay Street technology analyst who is now a management consultant, has a relatively new blog called On Disruption, and an interest in how industries such as media are being disrupted by Web technologies. He and I got talking via email about how newspapers are (or should be) dealing with some of the forces that are acting on them — something I’ve been writing and thinking a fair bit about, and something we talked about at the mesh conference last month — and then it kind of turned into an email Q & A about those issues, which Mike has posted on his blog. Here’s an excerpt:

It doesn’t take a genius to figure out that the Web is one of the biggest growth areas, and one that news organizations of all kinds need to find some way of working with. Not that people won’t continue to read newspapers, because they will — in the same way people still go to the theatre to see plays. There are just a whole lot fewer people doing that than there used to be, and anyone in the theatre business or the play business has had to deal with that change somehow.

To me, a news organization has to focus on what its core skills are — whether it’s breaking news, investigative journalism, social and cultural coverage, opinion and analysis, political coverage or local news, or some combination of all those things. If anything, people need the kind of filtering and aggregating and analyzing function that newspapers bring to the table even more now that there is a firehose of information coming at us on the Web. News may increasingly be a commodity, but context is more important than ever.

If you need any evidence that newspapers are in a world of hurt, Mike has links to some nice (or not so nice) graphs, including this one — which tracks readership declines from 1964 to 1997 — and one which shows the decline from 1999 to last year. It’s interesting to note that the industry has seen the same size of decline in the past seven years (about 10 percentage points) as it saw in the previous 30 years.

Mike also points to these recent comments from legendary value investor Warren Buffett:

“Newspapers face the prospect of seeing their earnings erode indefinitely. It’s unlikely that at most papers, circulation or ad pages will be larger in five years than they are now. That’s even true in cities that are growing. But most owners don’t yet see this protracted decline for what it is.

It’s hard to make money buying a business that’s in permanent decline. If anything, the decline is accelerating. Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college. The old virtuous circle, where big readership draws a lot of ads, which in turn draw more readers, has broken down.”