Massive NEWS >> Microsoft to BUY Yahoo!

anuary 31, 2008

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!’s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer

Steven A. Ballmer

Chief Executive Officer

Microsoft Corporation

Google, Yahoo may be eyeing Rediff

US-based Internet giants such as Google and Yahoo are eyeing Rediff.com India Ltd, which runs one of India's most popular consumer Internet portals, for a possible acquisition. Investment banking sources told Hindustan Times that the management of Nasdaq-listed Rediff was in talks with the global companies for a negotiated takeover deal.

Rediff, Google and Yahoo officials could not be immediately reached for their comments. Talk of the deal is emerging in the context of a general worldwide rebound in the Internet business, and India emerging as a hot story in the global economy with strong growth in both telephone penetration and the Internet in urban areas.

Leading US-based investment journal Barrons reported this month that Rediff is seeing speculation that it could be a takeover target. Rediff’s stock has witnessed a sharp jump in share price and volume on Nasdaq over the past week, when it also launched a Website to help consumers upload voice, video and photographic content for free.

The company's stock moved up to $25.41 per share on July 13 from $17.94 on July 5 and. The trading volume has increased to more than a million shares from an average of 50,000 share a day. In fact, on July 12, Rediff shares closed at $26.46 and more than 3.3 million shares traded hands. The company has a current market capitalisation of $738 million.

The sources said if the deal comes through, the valuation may be close to a billion US dollars.

The Barrons report quoted Ashish Thadani, an analyst at Gilford Securities, as saying that Rediff could fetch more than $ 25 a share in a sale and could see other suitors besides Yahoo and Google

Other suitors could possibly include AOL (America On Line), a division of Time Warner, which has a strong presence in offshore services from India, but is not a significant player in the market. Microsoft's MSN portal is also keenly stepping up its presence in the Indian market.

Rediff.com India, an online provider of news, information, communication, entertainment and shopping services, reported a net income of $2 million for the fourth quarter or $6.89 per ADS, compared with $0.53 million or $1.96 per ADS in the same quarter of the previous year.

The company's revenues increased 66 per cent to $8.48 million from $5.11 million in the same quarter of last year. India Online revenues, which include advertising and fee-based revenues, jumped 76 per cent to $6.30 million from $3.57 million in the year-ago quarter, while US Publishing revenues were $2.18 million, up 42 per cent from $1.54 million a year earlier.

The kid who turned down $1 billion!

"I'm just lucky to be alive." Mark Zuckerberg, the 22-year-old founder and CEO of social-networking site Facebook, is talking about the time he came face-to-face with the barrel of a gun. It was the spring of 2005, and he was driving from Palo Alto to Berkeley.

Just a few hours earlier, he had signed documents that secured a heady $12.7 million in venture capital to finance his fledgling business. It was a coming-of-age moment, and he was on his way to celebrate with friends in the East Bay.

But things turned weird when he pulled off the road for gas. As Zuckerberg got out of the car to fill the tank, a man appeared from the shadows, waving a gun and ranting. "He didn't say what he wanted," Zuckerberg says. "I figured he was on drugs." Keeping his eyes down, Zuckerberg said nothing, got back into his car, and drove off, unscathed.

Today, it is an episode that he talks about only reluctantly. (A former employee spilled the beans.) But it fits the road he has taken--an adventure with unexpected, sometimes harrowing, moments that has turned out better than anyone might have predicted.

Zuckerberg's life so far is like a movie script. A supersmart kid invents a tech phenomenon while attending an Ivy League school--let's say, Harvard--and launches it to rave reviews. Big shots circle his dorm to make his acquaintance; he drops out of college to grow his baby and Change The World As We Know It.

Just three years in, what started as a networking site for college students has become a go-to tool for 19 million registered users, including employees of government agencies and Fortune 500 companies. More than half of the users visit every day. When a poorly explained new feature brought howls of protests from users--some 700,000--the media old and new jumped to cover the backlash.

But Facebook emerged stronger than ever. According to comScore Media Metrix, which tracks Web activity, it is now the sixth most-trafficked site in the United States -- 1% of all Internet time is spent on Facebook. ComScore also rates it the number-one photo-sharing site on the Web, with 6 million pictures uploaded daily.

And it is starting to compete with Google and other tech titans as a destination for top young engineering talent in Silicon Valley. Debra Aho Williamson, a senior analyst at eMarketer, says it is on track to bring in $100 million in revenue this year--serious money indeed.

Yet there is an undercurrent of controversy about whether Mark Zuckerberg is making the right decisions about the juggernaut he has created.

Late last year, a blog called TechCrunch posted documents said to be a part of an internal valuation of Facebook by Yahoo. The documents projected that Facebook would generate $969 million in revenue, with 48 million users, by 2010. The New York Times and others reported that Yahoo had made a $1 billion offer to buy Facebook -- and Zuckerberg and his partners had turned it down.

This followed an earlier rumor of a $750 million offer from Viacom. Yahoo, Viacom, and Facebook would not comment on the deal talk (and they still won't). But Silicon Valley has been abuzz ever since.

"It's all been very interesting," deadpans Zuckerberg, sitting in a conference room in Facebook's Palo Alto headquarters. He looks every bit the geek in his zippered brown sweatshirt, baggy khakis, and Adidas sandals. He came into the room eating breakfast cereal from a paper bowl with a plastic spoon.

He still lives in a rented apartment, with a mattress on the floor and only two chairs and a table for furniture. ("I cooked dinner for a girlfriend once," he admits at one point. "It didn't work well.") He walks or bikes to the office every day.

Zuckerberg's college-kid style reinforces the doubts of those who see the decision to keep Facebook independent as a lapse in judgment. In less than two years, the two reigning Web 2.0 titans have sold out to major corporations: MySpace accepted $580 million to join News Corp., and YouTube took $1.5 billion from Google. Surely any smart entrepreneur would jump at a chance to piggyback on those deals.

Looming over the Facebook talk is the specter of Friendster, the first significant social-networking site. It reportedly turned down a chance to sell out to Google in 2002 for $30 million, which if paid in stock, would be worth about $1 billion today.

Now Friendster is struggling in the Web-o-sphere, having been swiftly eclipsed by the next generation of sites. The same thing could happen to Facebook. New social-networking sites are popping up every day.

Cisco bought Five Across, which sells a software platform for social networking to corporate clients. Microsoft is beta-testing a site named Wallop. Even Reuters is planning to launch its own online face book, targeting fund managers and traders.

So is Zuckerberg being greedy--holding out for a bigger money buyout? If so, will that come back to haunt him? If not, what exactly is his game plan?

Zuckerberg's answer is that he's playing a different kind of game. "I'm here to build something for the long term," he says. "Anything else is a distraction." He and his compatriots at the helm of the company--cofounder and VP of engineering Dustin Moskovitz, 22, his roommate at Harvard, and chief technology officer Adam D'Angelo, 23, whom he met in prep school--are true believers. Their faith: that the openness, collaboration, and sharing of information epitomized by social networking can make the world work better.

You might think they were naive, except that they're so damn smart and have succeeded in a way most people never do. From a ragtag operation run out of sublet crash pads in Palo Alto, they now have two buildings (soon to be three) of cool gray offices and employ 200 people who enjoy competitive salaries and grown-up benefit packages--not to mention three catered meals a day with free laundry and dry cleaning thrown in. And they continue to crank out improvements to a Web site that is in every meaningful way a technological marvel.

Right now, the folks who fronted Zuckerberg that $12.7 million back in the spring of 2005 and the other venture investors whose money and connections have helped juice Facebook's growth describe themselves as content.

After all, since news of the Yahoo deal surfaced, the user base has continued to boom, arguably increasing Facebook's value. But when those money guys start agitating to realize a gain on their investment, can a sale--or more likely an IPO--be far behind?

"What most people think when they hear the word 'hacker' is breaking into things."

Zuckerberg admits to being a hacker--but only if he's sure you understand that the word means something different to him. To him, hacker culture is about using shared effort and knowledge to make something bigger, better, and faster than an individual can do alone.

"There's an intense focus on openness, sharing information, as both an ideal and a practical strategy to get things done," he explains. He has even instituted what he calls "hackathons" at Facebook--what others might call brainstorming sessions for engineers.

But it was old-fashioned breaking-and-entering hacking that spawned Facebook--and Zuckerberg was the culprit. Zuckerberg grew up in the well-to-do New York suburb of Dobbs Ferry, the second of four kids and the only son of a dentist (he has no cavities) and a psychiatrist (insert your own mental-health joke here).

He began messing around with computers early on, teaching himself how to program. As a high school senior, at Phillips Exeter Academy, he and D'Angelo built a plug-in for the MP3 player Winamp that would learn your music listening habits, then create a playlist to meet your taste.

They posted it as a free download and major companies, including AOL and Microsoft, came calling. "It was basically, like, 'You can come work for us, and, oh, we'll also take this thing that you made,'" Zuckerberg recalls. The two decided to go to college instead, D'Angelo to Caltech and Zuckerberg to Harvard.

That's where the hacking episode occurred. Harvard didn't offer a student directory with photos and basic information, known at most schools as a face book. Zuckerberg wanted to build an online version for Harvard, but the school "kept on saying that there were all these reasons why they couldn't aggregate this information," he says.

"I just wanted to show that it could be done." So one night early in his sophomore year, he hacked into Harvard's student records. He then threw up a basic site called Facemash, which randomly paired photos of undergraduates and invited visitors to determine which one was "hotter" (not unlike the Web site Hot or Not). Four hours, 450 visitors, and 22,000 photo views later, Harvard yanked Zuckerberg's Internet connection.

After a dressing-down from the administration and an uproar on campus chronicled by The Harvard Crimson, Zuckerberg politely apologized to his fellow students. But he remained convinced he'd done the right thing: "I thought that the information should be available." (Harvard declined to comment on the episode.)

Ultimately, Zuckerberg did an end run around the administration. He set up the Facebook template and let students fill in their own information. The new project consumed so much of his time that by the end of the first semester, with just two days to go before his art-history final, he was in a serious jam: He needed to be able to discuss 500 images from the Augustan period.

"This isn't the kind of thing where you can just go in and figure out how to do it, like calculus or math," he says, without a trace of irony. "You actually have to learn these things ahead of time." So he pulled a Tom Sawyer: He built a Web site with one image per page and a place for comments. Then he emailed members of his class and invited them to share their notes, like a study group on cybersteroids. "Within two hours, all the images were populated with notes," he says. "I did very well in that class. We all did."

Thefacebook.com, as it was originally called, launched on February 4, 2004. Within two weeks, half the Harvard student body had signed up. Before long, it was up to two-thirds.

Zuckerberg's roommates, Moskovitz and Chris Hughes, joined in, helping to add features and run the site using a shared hosting service that cost $85 a month. Students from other colleges began approaching them, asking for online face books of their own.

So the trio carved out new areas on the site for places like Stanford and Yale. By May, 30 schools were included, and banner- type ads for student events and college-oriented businesses had brought in a few thousand dollars.

"We just wanted to go to California for the summer."

That's how Zuckerberg describes his decision, at the end of sophomore year, to head out to Palo Alto with Moskovitz and Hughes. They sublet a house not far from the Stanford campus. And then fortune intervened.

Out on the street one evening, Zuckerberg bumped into Sean Parker, a cofounder of the file-sharing program Napster. The two had met briefly back East. It turned out Parker was moving to Palo Alto but didn't yet have an apartment. "Basically we just let him crash with us," Zuckerberg says.

Parker moved in, bringing with him an irrepressible spirit, lots of ideas, a killer Rolodex--and a car. Parker was also a walking, talking cautionary tale for what can happen to young entrepreneurs.

After Napster was derailed by legal challenges from the music and movie industries, Parker had helped launch Plaxo, a site that updates contacts. But he told everyone he'd been pushed out by venture heavyweight Michael Moritz of Sequoia Capital, an early backer of Yahoo, Google, and YouTube. (Sequoia declined to comment.) Zuckerberg took it all in.

Within a few weeks, Parker introduced Zuckerberg to his first major investor, Peter Thiel, cofounder of PayPal, president of hedge fund Clarium Capital, and managing partner of the Founders Fund. After Zuckerberg's 15-minute pitch on Facebook, Thiel was clearly interested.

"Peter is a fast-talking, sort of intimidating guy," says Matt Cohler, then a colleague of Thiel's who was in the room. "But Mark stayed calm and got the information he needed." By the end of the talk, he also got a commitment for $500,000 in seed money and an entr�e into the exclusive social network of Silicon Valley.

Zuckerberg and his friends had caught the entrepreneurial bug. With the end of summer approaching, Zuckerberg thought back to a presentation he'd heard at Harvard from a well-known dropout. While taking a computer-science class, he recalls, "Bill Gates came and talked."

Gates encouraged the students to leave and go make something, since Harvard lets students take as much time off as they want. "If Microsoft ever falls through, I'm going back to Harvard," he joked. With Thiel's money to sustain them, Zuckerberg and Moskovitz decided to follow Gates's advice.

Zuckerberg and a growing cadre of engineers managed the Facebook site from a series of sublets around Palo Alto, coding together in endless sessions on rickety furniture. "We never had any money," he recalls with a laugh. "We actually bought a car on Craigslist. You didn't need a key. You just had to turn the ignition." In November 2004, Facebook passed the 1 million--users mark. Six months later, with the help of Thiel, Zuckerberg signed the papers for that $12.7 million in financing from Accel Partners. He hired a new fleet of engineers (including Steve Chen, who would leave a few months later to cofound YouTube). And he moved the company into real office space, on Palo Alto's University Avenue. By the fall of 2005, there were 5 million active users, those who visit the site at least once a month.

Ask anyone who works there what Facebook is, and you will get pretty much the same answer: a social utility that lets people share information with the people in their world quickly and efficiently. Unlike MySpace, where anyone can trawl the site or take on a different persona, Facebook is based on real-world networks of people who share the same email domain and actually want to know more about one another.

What you share--vacation photos, contact information, favorite movies, current whereabouts, upcoming events, whatever--is entirely up to you. This all made perfect sense for the college crowd, who show up at school hungry to meet the people around them. But Web 2.0 watchers wondered how Facebook could grow into something that would work for the rest of us. And it needed to do that, if for no other reason than that the original audience was growing up and getting jobs.

In September of 2005, Facebook was opened up to high school students, many of whom had older siblings already on the site. The following month, the site added a photo feature, and technical demands skyrocketed.

"We're one of the largest MySQL Web sites in production," says chief operating officer Owen Van Natta, 37. MySQL, a popular open-source software, "has been a revolution for young entrepreneurs," Van Natta explains, partly because it frees them from paying the licensing fees of, say, an Oracle. But with sophistication comes heat. Literally.

"In computing, as things get smaller, they run hotter," Van Natta says. When he first joined the company in late 2005, he recalls, it was growing so rapidly there was almost a meltdown. "We were trying to predict how many new users we'd get, how they would use the site, and what we'd need to serve that," he says.

There weren't enough people to do all the analysis. "We were just trying to keep the wheels on the wagon." When he went to check the data center, he was horrified. "There were little fans like this big"--holding up his hands to indicate the size of a grapefruit--"tucked between the servers. It was over 110 degrees in some aisles."

And the data-center guys were plugging in more servers and screwing them into racks, trying to keep up with the rapidly scaling site. The Plexiglas sides of the server racks were warping from the heat. "I was, like, Mayday!" he recalls. "We need to get on top of this!"

Growth continued. In June 2006, the site was opened to work networks. There are more than 20,000 networks of employees, from the Central Intelligence Agency and the Internal Revenue Service to Macy's, McDonald's, Time Inc., and the U.S. Marine Corps. Even MySpace, considered by many to be a Facebook rival, has a corporate network of 22 employees.

Then in September, Facebook announced what it called "open registration": Anyone with a valid email address could join a regional network. It was an auspicious moment--until the Facebook community rose up and almost destroyed its creator. The problem was a new option called News Feed, which creates regular reports about the activity within a network or group of friends.

It may have seemed like a good idea at the time, but it set off a revolt in the Facebook community. Users felt that their personal information was being broadcast all over the Web without their permission. Never mind that they had posted it all publicly themselves. Or that it went only to people who were friends or already in their networks.

Facebook is a fast-moving, throw-it-up-and-see-if-it-works sort of place that typically adds a feature, watches how people use it, and, based on feedback, adds things such as extra privacy controls. But this time, Zuckerberg and his crew had made a mistake by not putting privacy features in place first.

Taking advantage of another new feature, which allowed individuals to start their own issue-oriented "global groups," disgruntled users set up a group they called Students Against Facebook News Feed (Official Petition to Facebook).

Ironically, the News Feed service itself then spread the campaign ("Your friend has just joined this group!"). In less than 48 hours, 700,000 people had joined the protest, and the blogosphere declared it the end of Facebook. News crews camped outside the Facebook offices, as if a bald Britney Spears were being held captive inside. "There was a hilarious email thread as we discussed what to do," says Zuckerberg, who was stuck in New York fending off his own onslaught from the media.

"Someone writes, 'Okay, it's like midnight, and we want to leave. But we can't even look through the blinds because they're videotaping us. I'll pay someone $50 to go streaking.'"

From his New York hotel, Zuckerberg posted an open letter to users via the blog on the site. "We really messed this one up," he wrote.

"When we launched News Feed and Mini-Feed we were trying to provide you with a stream of information about your social world. Instead, we did a bad job of explaining what the new features were and an even worse job of giving you control of them." His engineers worked around the clock for three days to add better privacy features.

The storm eventually passed, and Zuckerberg now claims News Feed has actually been a hit. "Once people had the controls and knew how to use them, they loved News Feed," he says, launching into some uncharacteristic hyperbole.

"We're actually producing more news in a single day for our 19 million users than every other media outlet has in their entire existence." (Facebook has also been snared in a more lingering dispute: When the site first launched, four other Harvard students sued, claiming that Zuckerberg stole their idea. The Facebook defendants filed a countersuit. At press time, litigation is continuing.)

"We're private, and we just don't talk publicly about these types of things."

We're in the Facebook conference room at the end of the day, and Zuckerberg is politely ducking questions about the company's financials. Last spring, Facebook received another infusion of VC funding--$25 million led by Greylock Partners and Meritech Capital; Accel and Thiel also reinvested.

But conversations with the executive team make it clear that Facebook isn't living on VC cash, at least not anymore. When I met with Cohler, who joined Facebook as the vice president of strategy and business operations, I asked bluntly whether a report in The New York Times that said the company was profitable was correct. At first, he hemmed and hawed. "It depends on how you look at GAAP accounting." But then he allowed: "We're growing very fast, and we're funding the growth of the company through revenue and the operations of the business as opposed to financing."

And the scale of those operations is significant. Beyond the 200 staffers and prime Valley office space, explains cofounder and chief of engineering Moskovitz, Facebook has multiple server facilities. The company is also about to invest what COO Van Natta says is "many millions of dollars" on more infrastructure.

So how does Facebook make its money? Advertising and sponsorships, mostly. Apple was an early backer, sponsoring a site for iTunes enthusiasts. JPMorgan Chase and Southwest, among others, pay for similar programs.

"Flyers," the online version of the paper ads that students use to publicize events, also provide a very modest source of revenue. And there is a nascent-but-growing local advertising business. The big money, though, comes from an ad-placement alliance with Microsoft in which the software giant will place banner ads on the site through 2011.

It mirrors a deal MySpace inked with Google last year. (MySpace reportedly got $900 million over three years. Facebook hasn't released the value of its program, and neither party will comment on the terms.) Facebook also just inked a deal with Comcast to create and Webcast an episodic show based on user-generated video content.

Called "Facebook Diaries," the series will be shown on both Facebook and Ziddio.com, Comcast's video-uploading site, as well as through Comcast's video-on-demand service.

"Okay," Zuckerberg says, "you have a Viacom, News Corp., and Yahoo. So you compare and think, This is social, but we're a technology company. What's in it for us? How will it work?"As everyone remembers from the heady sock-puppet days of Web 1.0, you hatch an idea, build it into a company, and concoct an exit strategy--that's the key to taking the business to the next level and rewarding early-stage investors for their money and employees for their hard work.

And there are two basic formulas: Sell to a bigger company, or file an initial public offering. With all the talk about valuations and acquisitions, not to mention the pressure of investors and employees with stock options, exit has to be on Zuckerberg's mind, right?

"The word--it applies a certain frame to thinking about things," he says, decompressing after a long day of meetings. "If you sell your company, that is the exit. That's just not how we think about it."

He pauses, then says with a sigh, "Okay, you have a Viacom, News Corp., and Yahoo. So you compare and think, This [site] is social, sure, but we're a technology company. What's in it for us? How will this work?" The companywide focus is on innovation and engineering, and the commitment to optimizing the user experience, he says.

The goal is not to create a media company. It is not about selling movies. "There are ways that you could do it, but right now, we're focused on building this. And if you look at the stats we have, it's been a good decision so far." But eventually? "At some point, it probably makes sense to do something. But we're in no rush."

One clue to the company's future plans comes from early investor Thiel, who has mentored Zuckerberg through the last year's swirl of acquisition talks and rumors. Bottom line, Thiel asserts, "it's much more valuable than anybody on the outside thinks." He points to the growing user base and page views as evidence. "The people who understand the power are the users. The people who wanted the company don't understand the power and don't want to pay enough for it. So we're not going to sell."

He adds, "I think the MySpace sale was a giant mistake. The Flickr sale to Yahoo--a giant mistake." A better idea, he believes, is to focus on the technology, which he says is the Facebook team's great strength, and continue to grow the company. He points to a laundry list of benchmarks that they'd all like to see. "Can we get to 35 million users this year?" Dominating another sector beyond the college crowd would be key. "If we were to see that in the high school space, that would be very significant."

But Thiel is aware of a ticking clock of sorts, determined by a Securities and Exchange Commission rule. "Once we get to 500 shareholders, we'll be forced into a situation where you have to give full financial disclosure," he says. (Facebook employees have shares as part of their compensation packages.) Most companies go public at that point. "But our current bias is not to do it any sooner."

What seems most likely is some version of a publicly traded Facebook, one that might emulate the quirky Dutch-auction IPO that Google filed in 2004. It seems like a natural fit; Facebook admires the minimalist sensibilities of Google's design, its focus on engineering, and the "do no evil" philosophy that, theoretically, at least, informs its business. Best of all, if handled properly, an IPO keeps the founders firmly at the helm, just like Sergey Brin and Larry Page at Google.

And an IPO would seem to be a good fit for Meritech Capital Partners, which participated in the last round of financing for Facebook a year ago. "Certainly most of our companies go through liquidity in the public markets," says Meritech founder Paul Madera. "Public markets seem to want to pay more than acquirers these days."

If Facebook got a very large offer, they'd have to consider it, he says. "But today, any offer around a billion would be way low."

But Zuckerberg maintains that nothing is happening quickly. "It's a really big change if you go public--all the regulations and stuff, so it's not something that you do lightly."

For now, the company is on track to double its engineering team of 50 this year (check out the first step in the application process at facebook.com/jobs_puzzles) as well as its 50-person customer-service group, headed by Tom LeNoble, who ran global service operations for Palm and customer service for walmart.com and MCI. His reps are mostly from top-shelf universities. (By my estimate, there's $5 million worth of tuition handling customer service at Facebook.)

New users keep flooding on board--100,000 signed on in a single day this past February. The college markets in Canada and the UK have been growing almost 30% a month (Prince Harry and his girlfriend are Facebook users, according to breathless reports in the British tabloids), and nearly 28% of all users are now outside the United States.

And slowly but surely, the site is adding older folks: 3 million users are age 25 to 34, 380,000 are 35 to 44, and a pioneering 100,000 users are currently eligible for Medicare. With stats like that, you can certainly see public-market investors getting excited.

Thirty-six months ago, Zuckerberg was a college sophomore cruising out to California on summer break. Now he approves everything from new hires to the activities of every advertising partner and runs the board meetings of a very-much-established company.

Zuckerberg was even invited to speak at Davos this year. How did it go? "It was great," he says, leaning forward conspiratorially. "I wore shoes."

BW - If Google Shopped Until It Dropped

It was a glorious Thanksgiving for the founders of Google Inc. (GOOG ), whose shares now trade around $500, having more than quintupled in 27 months. Yes, a market value of $155 billion is some kind of cornucopia. So with tryptophan coursing through their veins and visions of search algorithms dancing in their heads, Sergey Brin and Larry Page let their post-meal thoughts drift to what most other Americans were fixating on: shopping.


If they didn't, they should have. The market has handed Google a pile of paper money that may or may not hold its value. Just ask rival Yahoo! Inc. (YHOO ). At its peak, it was worth $150 billion; now it's worth $37 billion and kicking itself for not having spent more of its stash.

Google's surging stock is practically begging to be used for acquisitions. The company trades at 37 times next year's expected earnings per share, more than twice the broader market's price-earnings ratio. Analyst Laura Martin of Soleil-Media Metrics notes that to justify its valuation, Google would have to deliver 25% annual compounded growth over the next decade. Can its killer search engine pull off that kind of streak? It's doubtful. "At some point, they'll have diminishing returns from paid search," says Martin P. Pyykkonen, senior Internet analyst at San Francisco investment bank Global Crown Capital. "There's no question they need to diversify." The $1.6 billion acquisition of Internet upstart YouTube Inc. was a start, but much more can be done.

Portfolio strategists say investors can allocate as much as 5% of their portfolios to purely speculative holdings, also known as mad money. But with the stakes so big, Google would be wise to put aside even more of its paper value--say, 7% or 8%--for investments to add some real diversification. Herewith: a $12 billion holiday shopping list.

It should start with a contrarian media play: the New York Times Co. (NYT ), now worth just $3.5 billion, roughly its 1998 level. The industry has never been so uncertain, and Google has already struck deals with some newspapers to post archived content. Meanwhile, Times management is under fire from a big shareholder, Morgan Stanley (MS ) Investment Management, which is trying to change its governance structure to take some power away from the controlling Sulzberger family. What better time for a white knight to step in?

The asking price, including the assumption of debt and the satiation of the Sulzbergers, might be $6.5 billion. That would land Google the Web site About.com, 155 years of searchable Times archives, and swank new headquarters in Times Square--all for just 1/25 of the Google pie. If it acts now, Maureen Dowd might even emcee its holiday bash.

Next stop: real estate, of which Google has too little. Any self-respecting media giant needs a theme park. For a piddling $2 billion or so, Google could buy Walt Disney's (DIS ) aging Epcot Center in Orlando and rechristen it Google World. The prospect of animatronic Larrys and Sergeys might not get millions of tourists flooding in, but Google could actually use some losses to ease its tax load.

Commodities, baby! Google is light in natural resource holdings. Peruvian copper would kill two birds with one stone by providing emerging markets exposure as well. The problem is that pollution-spewing Peruvian copper mines kill thousands of birds each year. Google's Prius-loving staff won't go for that.

So why not invest in Pacific Ethanol Inc. (PEIX )? It can be had for an easy $1 billion, assuming a more than 20% premium. Besides improving the planet, ethanol would give Google reason to pursue another complementary asset: Ted Turner, America's largest individual landowner, with 2 million acres across seven states. Google's ethanol plants would need vast tracts of land on which to grow corn and switch grass--and Ted's 40,000 head of bison could happily fertilize that acreage. Price tag? Totally affordable.

That leaves emerging markets. How about assuming the balance of Turner's $1 billion philanthropic tab to the U.N.? Don't dawdle, guys. Use it or lose it.

Here Come The Bride Sites (Businessweek)

U.S. Net heavies are wedding India's fast-growing matchmaking dot-coms

There's Yahoo! Finance, Yahoo! Autos, and Yahoo! Jobs. So why not Yahoo! Weddings? In India, the Internet giant is playing online cupid to people looking for arranged marriages. In September, Yahoo! Inc. and Silicon Valley venture capital firm Canaan Partners jointly paid $8.5 million for what industry insiders say is roughly 10% of BharatMatrimony.com, a nine-year-old marriage Web site that also has 50 offices across India to serve those without Net access. "BharatMatrimony will help us get a larger share of the Internet market" in India, says Yahoo India Managing Director George Zacharias


One satisfied customer is Pradeep Nair. The 32-year-old packaging material exporter from Mumbai tried finding a bride the traditional way: by hiring a matchmaker. "There was something or the other missing" with each of the 50 or so candidates, he says. Either her horoscope didn't match his own -- a key consideration for conservative Hindus -- or she fell short of his ideal: a tall, attractive working woman. Frustrated, Nair paid $27 to sign up with BharatMatrimony. Three months later, he wed Vrinda, 28, an accountant working for Indian carrier Jet Airways. Nair plans to register his sister on the site next. "It's easy to access, and it throws up good choices," he says.

EASY TO SAY "NO"
Yahoo isn't the only foreign player getting hitched to an Indian marriage site. Microsoft Corp. a year ago hooked up with Shaadi.com, though it didn't invest any money in the site. "Shaadi helps attract huge numbers of users," says MSN India country manager Jaspreet Bindra. Silicon Valley venture capital fund Kleiner Perkins Caufield & Byers has plowed some $4.6 million into Info Edge, which runs matrimonial site Jeevansathi.com. Google Inc. also is said to be prospecting for a partner, though the company declines to comment.

There are plenty of potential mates for overseas Net companies. India has scores of sites dedicated to brokering marriages, while Net dating services are less popular. Some 7.5 million people use the marriage sites, up from 4 million in 2004, the Internet & Mobile Association of India estimates. Since registration is free, and users only pay when they want to contact a potential partner, the sites are likely to take in just $21 million or so this year. But there's plenty of room to grow. Indians lay out nearly $500 million a year for offline marriage services such as matchmaking, the biggest category of print classifieds. "Today the emphasis is on compatibility and being a professional, something the Internet lets you test, as opposed to the traditional contacts," says Anupam Mittal, Shaadi.com's founder.

The popularity of the sites reflects the changing face of India. Traditionally, Indian marriages have been brokered by family, friends, or professional matchmakers, a laborious process that involves matching candidates on the basis of religion, caste, community, and horoscopes. Busy professionals such as Charoo Kher prefer the speed of the Net. A customer-relations manager at India's commodity exchange, Kher, 31, had no time for dating so she registered on Shaadi.com. She and her Punjabi family reviewed 100 or so profiles -- with details such as hobbies, favorite foods, and salary -- and settled on Gurmeet Walia, a 35-year-old caterer. "The ease of finding many profiles online under one roof seemed practical," Kher says. The couple wed eight months ago.

Online matchmaking offers another advantage: In India there's a stigma attached to turning down a marriage proposal. The Internet allows users to disengage easily if they don't, well, click.

Business Today - The Battle of Two Portals

It's a battle that has largely remained invisible. Yet, two global portal giants are fighting it out for dominance in India's fledgling internet market. One reason why the battle between msn, the portal from software giant Microsoft, and Yahoo has gone unnoticed is because of the size of the Indian internet market. With total online advertising estimated at a paltry $50 million (Rs 230 crore), the Indian market is a mere 0.4 per cent of the $12.5-billion (Rs 57,500-crore) us online advertising market. But then what matters for internet businesses is not the here and now, but the future. The number of internet users in India-37 million-may not appear big, but a million new users are added to that base every month and by 2010, an estimated 78 million Indian users are expected to be surfing the web.

That's the sort of market Yahoo and msn are targeting and to do that both players have unveiled a flurry of India-focussed products to woo users. msn, with estimated Indian ad revenues of about $4.5 million (Rs 20.7 crore), celebrated its sixth anniversary in India recently by revamping its Indian site, adding four new channels on lifestyle, sports, news and entertainment, sfx advertising (a special effects advertising package that allows contextual targeting of surfers), and the launch of the portal in five regional languages-Hindi, Tamil, Telugu, Kannada and Malayalam.

Yahoo India (estimated ad revenues around $8 million or Rs 36.8 crore), which also completed six years in the country this year, has been equally aggressive with its India strategy. Last fortnight, it introduced Yahoo! Search Marketing, which enables advertisers to bid for priority placements in web search results that are served up in response to a user's search for a product or service. In a couple of months it will launch its instant messenger (IM) service (currently offered in English) in a host of regional languages.

In May this year, on a visit to India, Yahoo's CEO Terry Semel spoke of Yahoo's commitment to India and even hinted at big-ticket acquisitions that the company could be making in the Indian market. Says Yahoo's coo Daniel Rosensweig (who was in India last fortnight): "This is a market nobody can take lightly."

Tomorrow's Market

India's attraction is its size and potential-its population of over a billion people and growing numbers of internet users. But web strategies of both these portals (and of other Indian players) haven't targeted the really big numbers. Of the urban population of 250 million people, just 75 million are English speakers. And 37 million of them are internet users. Says Murugavel Janakiram, CEO of Bharat Matrimony, one of the largest Indian online matrimonial services sites: "It is predicted that in a couple of years, the internet will have captured the entire English speaking population and saturated the market." That's precisely why both Yahoo and msn are going local and launching sites, products and services in regional languages. Like Yahoo's IM in Indian languages, msn too will soon roll out its messenger service in five Indian languages-Hindi, Tamil, Telugu, Kannada and Malayalam.

By going regional, both expect to expand the market and capture a larger share of it. "The old misnomer that internet users are only English speaking has gone out of the window. The top end of internet users, the most affluent and well-do-to in India, are the language audiences," says V. Ramani, founder & ceo of Media Turf, a leading Indian internet advertising company.

For both portal giants, not to be in India is not a choice. Of the 500 million Yahoo users in the world today, half that number are in the us (population: 300 million), with the remaining coming from the rest of the world. Clearly, future growth will come from outside the us. And the biggest potential is in-yes, you guessed right-India and China. Says Rosensweig: "We see the biggest growth coming from outside the us and we see India as one of the biggest opportunities over the next 5-20 years."

Although India is the smallest market among the BRIC (Brazil, Russia, India and China) countries, it is the fastest growing. The smallness, explains Jaspreet Bindra, Country Manager, msn India, is not in terms of subscribers; it's in terms of average revenue per user (ARPU), which stands at 50 cents (Rs 23) a year in India. "Compare this with newspapers in India which monetise their readers at $25 (Rs 1,150) a year. That means I'm a one-50th of the newspapers," explains Bindra. In China, the online advertising market is $500 million (Rs 2,300 crore) and with about 100 million internet users, the ARPU works out to a better $5 (Rs 230). Yet, internet companies are excited about India. "One of the biggest reasons why companies are excited about India is because China is a controlled market, where there is censorship on the internet," says Bindra.

YAHOO: WHAT'S IN STORE? Bloggers, businesses all are welcome. Here's the lowdown:

Jobs search: Currently in beta, Yahoo's new job search service will allow users to search for a particular job profile. "The Yahoo job search will crawl through all the job sites in the world and throw up the relevant vacancies," explains George Zacharias, Managing Director, Yahoo India. Yahoo! 360: This is Yahoo's site for bloggers, which allows users to create their own pages with text and pictures. Currently in beta, the service is expected to be launched soon. Content: Yahoo will soon be launching several new channels of interest to the India audiences. "We want to bring all our international services to India," says Zacharias. Search engine platform codenamed Panama: Expected to be launched in the first quarter of next year, the new paid listing model will be more like Google's AdWords, where clickthroughs impact ranking. Yahoo Search Marketing: Based on the advertising model called Sponsored Search, it allows businesses to bid for highly visible placements in the search results that are served in response to a user's query for a specific product or service.

MSN LIVE: WHAT'S IN STORE? Everything from video uploads to social networking. Take a look:

Soapbox on MSN Video: The service lets people upload, share and discover videos within the Soapbox community and with people around the world. You can sign up to be wait-listed for the beta at http//soapbox.msn.com. Windows Live Messenger: It takes messaging to a new level, allowing users to easily have full-screen rich video conversations with people on their contact list, call their friends on their PC or phone, and share personal files instantly. Live Search and Live.com: Live.com customers can customize their home page content, create multiple pages, and add their favourite content from millions of sources of information. Windows Live Spaces: This (http://spaces.live.com) is a free, easy-to-use, customizable social networking and blogging service that provides you with a place to connect with your friends, and tell your story using blogs, photos and more. Windows Live Writer: Windows Live Writer combines the desktop editing tools found in Microsoft Word with a set of enhancements that will help bloggers posts in the style of their blog and easily include rich media assets such as photos, maps and videos.

In For The Long Haul

Their bullishness notwithstanding, the two portal giants aren't the biggest players in India, at least not for now. According to industry ad revenue estimates, Yahoo is #4 and msn India #5. In the top two spots are Indian internet company, rediff.com with estimated ad revenues of $13.21 million (Rs 60.76 crore) and search giant Google with an estimated $10.44 million (Rs 48 crore). Indiatimes is a close third with an estimated $8.88 million or Rs 40.85 crore (see Click for Cash). Yet, their sheer global size enables them to pump resources that will put home-grown rivals in the shade. Yahoo's global revenues topped $5.25 billion (Rs 23,625 crore then) last year, while msn with $2.2 billion (Rs 9,900 crore then) in revenues, accounts for 5 per cent of Microsoft's sales of $44 billion (Rs 1,98,000 crore). In fact, it wouldn't come as a big surprise if either of these players made a play for some of the prominent Indian internet companies, provided they got them at a good price.

For both Yahoo and msn, the biggest share of revenues on the internet comes from advertising and the us with online ad spend valued at $12.5 billion (Rs 57,500 crore) in 2005 is the largest market for such advertising. In contrast, India's online advertising market is estimated at $50 million (Rs 230 crore). Why then are the two portal giants fighting over small beer? Says Ramani: "Business today is fragmented and only one-nth of what it can be in a couple of years. Monetisation per user is miniscule, but over a period of time, all investments will be justified." The Internet and Mobile Association of India estimates that the online advertising market will grow 35 per cent in the next year.

Besides launching products in regional languages, the two portals have also tied up with local players. While msn has tied up with shaadi.com, in August Yahoo, along with Canaan Partners, a global venture investor, announced a $8.65-million (Rs 39.79-crore) investment in Bharat Matrimony. "Yahoo's business model has always been to build, buy or partner the businesses we see potential in," says Rosensweig explaining the deal.

Increasingly, the two companies are launching products in India before they do so in the US. "There will be products we will launch only in India. You will see us very aggressive and very busy," says Rosensweig. MSN's Bindra too follows the same principle. "If I were talking to you a year back," he says, "I might have told you about various products and the fact that they are likely to come to India maybe three, two or one year down the line. Today, I can tell you that almost all our products are launched in India as soon as they are elsewhere, if not earlier. In fact, there are products being developed specifically for the Indian audience," he says, citing the example of user bots such as Munnabhai that have become a rage in India.

Challenges Galore

With India's mobile phone subscriber base slated to grow to 278 million (or nearly 24 per cent of the population) by 2010, Yahoo and msn are eyeing the wireless market. MSN is in talks with cellular service providers and handset manufacturers to provide its services in India on the mobile. Yahoo has already entered that market as have Indian players like Rediff and Indiatimes.

either Yahoo nor msn disclose revenue data or other financial information about their Indian operations, yet executives at both companies say they are satisfied with the progress of their businesses here. Only six years into the market, each claims to have garnered a sizeable slice of the pie. Industry estimates suggest Yahoo has about 15 per cent of the ad market, while msn has an 8.5 per cent share. Things aren't going to be easy, though. For one, ARPU is still low in India. Then, broadband costs are high and penetration is low. As is the usage of data on mobile phones. Says Rosensweig: "These are speed bumps rather than roadblocks."

With deep pockets and a long-term approach to the Indian market, Yahoo and msn could make life difficult for portals like Rediff, Sify and the newly re-launched Indya.com. Particularly because some of these home-grown players still depend on revenues from other sources. Sify, for instance, with an estimated market share of 3.3 per cent, continues to depend on services such as access, enterprise services and data centres, which account for nearly 90 per cent of its revenues. Rediff, on the other hand, won't be a pushover for the portal giants. The company launched the new 'Lightning Fast Rediffmail' in 11 languages in July, ahead of the competition, and recently, its instant messenger, Rediff Bol, in Hindi. With 45 million registered users, Rediff targets Indians worldwide and closed last year with revenues of around $18.70 million (Rs 84.15 crore) for 2005-06, when it also posted a small profit ($1.21 million or Rs 5.4 crore) for the first time in its 10-year history. Says Manish Agarwal, Vice President (Marketing), Rediff: "Providing innovative services that are easy to use, have a high utility value and are able to solve a real world problem or substitute a real world need is a challenge for all online companies." That, incidentally, holds good even if you are the two largest internet portals in the world.

Category/Top player Top of mind recall Yahoo: 35%; Google: 21%, Rediff: 15%, Indiatimes: 5% and Hotmail: 5% E-mail Yahoo is the biggest online brand in India, tops for e-mail: 37% share Matrimony Bharatmatrimony and Shaadi slug it out for the top matrimonial site: 33% share each Job search Naukri leads the online job search domain: 49% share Search Google is the king of information search: 77% share Ticketing IRCTC tops online ticketing source: 38% share Shopping Online buyers shop at ebay: 38% share Finance For financial content, the buck stops at Moneycontrol: 12% share Mobile Downloads Rediff is the website of choice for users who download mobile content from the net: 23% share Source: JuxtConsult India 2006 survey

Yahoo's India Internet Intentions

Back in May, a private jet ferried the top honchos of Yahoo! (YHOO) from Sunnyvale, Calif., to Bangalore. On board were company co-founder Jerry Yang, CEO Terry Semel, CFO Susan Decker, and corporate development head Toby Coppel on a whirlwind four-day, three-city Indian tour.

In Bombay, they threw a party for the top brass of India's top 12 advertising and media houses at the harbor-facing Taj Palace Hotel. The objective: to get some on-the-ground intelligence about the potential for India's small but rapidly expanding Internet market.

It looks as if they picked up a very welcoming message. "It is a superb time for Yahoo to be a significant player in India," Semel told his staff. In late September, Yahoo announced it was expanding its second biggest development center outside the U.S. in Bangalore from 800 engineers to 1,000. India already accounts for 10% of the company's global workforce. It is launching regional channels in Hindi, Tamil, Telegu, Kannada, and Malayalam.

"EXPANSION MODE." All this comes after Yahoo invested $8.65 million, together with private equity firm Canaan Partners, in an Indian matrimonial portal called Bharatmatrimony.com. And the U.S. mega-portal is hungry for more acquisitions and tie-ups. The company has introduced Yahoo Search marketing to place ads with searches and Yahoo Go!, a tie-up with Nokia (NOK) and Motorola (MOT) aimed at providing mobile phone users access to many of Yahoo's services, including messenger, e-mail, and search.

Other products are expected to be rolled out in coming months. Says George Zacharias, managing director of Yahoo India, "We are in expansion mode to provide a good experience with our range of Yahoo products and services customized for India."

If Yahoo is busy, so are the others, such as Microsoft's (MSFT) MSN, Google (GOOG), and Indian portals such as Rediff, Sify, and Indiatimes. MSN recently launched five regional channels with Messenger compatibility, and now wants to take its search and mail regional and look for opportunities in mobile telephony.

FRACTION OF ADS. Google is said to be in talks with many startups for voice and short message service, or SMS-based advertising. Rediff, launched more than a decade ago, was one of the first to go regional—just a couple of years ago. With 45 million global Indian users as of July, it launched a service called "lightning fast Rediffmail" in 11 languages and its Rediff Bol chat in Hindi recently. Indiatimes, the portal owned by publishing house Bennett & Coleman, is looking for acquisitions but will wait and watch before going regional.

With a PC penetration rate of 2%, vs. 60% in developed economies, India's Internet market is miniscule. According to the Internet and Mobile Association of India, there are 37 million Internet users, likely to go up to more than 54 million in 2008. And online advertising is a mere $25 million, just a fraction of India's total $2.5 billion advertising industry. In comparison, China's online market is said to be around $600 million.

Mobile-based services, however, are a huge opportunity with more than 200 million cell phone users in India. As Internet connectivity and broadband usage improves, Net advertising on mobiles could be big, say players. "With Indian consumers beginning to treat the Internet as a friend, reaching out to them becomes imperative," says Yahoo's Zacharias.

MULTIPLE LANGUAGES. "For us, it is both strategic and opportunity driven," says Jaspreet Bindra, country manager at MSN India. With more than 75 million Indians who speak English, the market has room to grow. Yet local language content is key, too. "We have to prepare for this and then go where our advertisers go," he adds.

Two-thirds of India's population live in villages, and today the five most-read publications are still regional. Regional television channels have higher viewership than their English counterparts. "That India is rich in language content anyway, makes it easier," says Mohit Hira, director of content and marketing at Indiatimes.

So portals are also beefing up their offerings. Having begun with pure content, they now have a range of services and are looking for more. Big on the popularity chart are airline and hotel bookings, astrology, matrimony, and e-commerce sites, which bring in cash. The players are not revealing their India revenues, but say that even as they want to grow organically, they have a war chest and M&A teams in place to grab any good buy.

Yahoo plans to bring in its Yahoo Finance and other services to reach India's huge market of youthful online readers. From all indications, it seems India is shaping up to be an interesting playground for global Net companies.

To compete with Google, Yahoo! should buy AOL

AOL has never quite worked as planned for Time Warner, Inc (NYSE: TWX). The merger of the two companies is seen as the cause of the drop in TWX stock to today's $19 -- much improved from earlier this year, but still well below $91, where it traded over six years ago. AOL is taking a large risk by trying to migrate from a subscriber-based revenue model to one driven by ad revenue.

It is hard to say what AOL is worth. One way to look at it: With Time Warner's market cap at $77 billion and AOL representing about 20% of revenue, the company might fetch $15 billion, depending on whether any of Time Warner's debt is involved. Since AOL is in transition, TWX might even sell the company for less.

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