When asked how he keeps up "with the latest tech news when there are so many blogs," Times editor David Gallagher immediately cited TechMeme, a direct competitor of Blogrunner, as "one of my favorite sites." Although the Times serves Blogrunner results from the front of Gallagher's own section, the editor didn't plug the site in his three-paragraph answer. It wasn't the first time the Times forgot about its 2005 acquisition; reporter Saul Hansell says he considered pushing the newspaper to develop something similar before discovering "we actually owned a company that did that" (see video).

It's great that Gallagher knows about TechMeme, a very useful aggregator. But, if he's going to help turn around the Times, he needs to help make Blogrunner more competitive. That means borrowing a key idea from the world of software startups: Eating your own dogfood; i.e. using your own product. And talking about it, when you have the chance.

(We sent Gallagher a couple of emails seeking comment but have yet to hear back; we'll update this post if we do.)

iLike became something of an icon for a certain class of startup: Built on social networks, fast-growing, unprofitable, advertising supported. The company's impending sale to MySpace at a fire-sale price could hardly be a bigger wakeup call to these fellow makers of software "widgets."

The company was once valued at $53 million, back when Ticketmaster bought a 25 percent stake in late 2006, according to the Seattle Times. iLike amassed a total of $17 million from Ticketmaster and other investors like Silicon Valley venture capitalist Vinod Khosla and former AOL exec Bob Pittman. Now it's negotiating to sell for just $19.5 million, All Things D reports, and $6 million of that is contingent on retaining certain employees in coming months.

It's quite comedown. But it's easy to see how iLike became a media darling and a hero to other makers of widgets. In the late spring of 2007, iLike ported its music recommendation service to Facebook, and in the process spiked its user base dramatically, to 15 million from 3 million over six months. In one week just after the Facebook launch, four venture capitalists asked CEO Ali Partovi (pictured) to lunch, the Seattle Post-Intelligencer reported; the company reportedly added close to 200 servers over the course of the summer.

After retaining insidery Silicon Valley flack Brooke Hammerling, iLike saw its praises sung widely in the media (emphasis added):

• Wall Street Journal, June 2007: "'Somebody's going to end up being the Facebook music service,' [co-founder Hadi Partovi] says. 'It's either going to be us, in which case we're made, or it's not.'" (By the time Patrovie gave this retrospective quote, iLike was by far the dominant music service on Facebook.)
• Billboard, July 2007: "The smart money says someone will acquire iLike, and soon. The company's social media discovery capabilities are a natural extension to any digital music service, particularly iTunes."
  
• BusinessWeek, July 2007:"'Widgets are a fundamentally important idea,' says Vinod Khosla... who has invested in two widget makers, Slide and iLike. 'I believe it has the potential to create big billion-dollar winners.'"
• Forbes, October 2007: "Says Khosla [Ventures]'s David Weiden: 'Widgets are the next kind of media network.'"
• USA Today, November 2007: "The company... has become an overnight sensation... Dave McClure, an angel investor in Silicon Valley, wouldn't be shocked if iLike... and others eventually go public."

Revenue was presumably slow in coming, though, because by fall of the following year iLike was said to be trying to sell itself and Ticketmaster wrote off half the value of its investment. Now investors are basically trying to break even with the MySpace sale. The music and advertising businesses have their own unique problems, but startups in other hot sectors, like iPhone apps, should beware: The excitement can dissipate as quickly as it inflates.

(Pic: Niall Kennedy)

A source who's plugged into the Valley's deal scene and has been recruited by Apple for a senior position says Apple and Twitter are in serious negotiations, with the goal of unveiling a deal by June 8, when Apple's annual Worldwide Developers Conference launches in San Jose.

Twitter turned down a $500 million offer in cash and stock from Facebook, in part because Twitter's investors couldn't agree on whether Facebook's stock was worth as much as Facebook said it was. But Apple could easily pay cash. A source familiar with the thinking of Twitter's board says the company would be hard-pressed to refuse an all-cash offer in the range of $700 million. (Is Twitter really worth that? Since it's business is nothing but a fantasy at this point, any valuation, high or low, is a matter of make-believe.)

What does Twitter, an adorable but unprofitable startup, have to do with a hardware company like Apple? The iPhone is the obvious driver of the deal: The many iPhone apps like Tweetie that people use to post Twitter messages are hot sellers for Apple. But Apple gets the benefit of Twitter-addicted iPhone users whether or not it owns Twitter. And it seems like an odd cultural fit, since Apple's hardly known for its Web prowess.

That's where the deal makes a certain amount of sense, if you understand the particular culture of those who work on the Web. While Apple might have its pick of hardware designers and software engineers, Web developers are a breed apart — and they have balked at working at a company like Apple, which may look innovative to the world at large, but seems fusty and hidebound to the Mission hipsters who build websites. You'll hear the complaints: Apple's secretive and paranoid, resistant to the wide-open ways of the Web.

Twitter , of course, is open in both nature and spirit. Users overshare every last detail of their lives, while Twitter makes these updates available on its website, via RSS, and through third-party applications. Apple is surely realizing it needs to play in this world, and needs someone to show it the way. Is it coincidence that Apple has put Twitter executives on stage so frequently, or that it profiled Twitter as a "business" recently?

If Apple buys Twitter, it won't be about making money. It will be about making a statement. In 140 characters or less.

(Photoillustration via Virality)

The company ought to be swimming in cash from taking a cut of every auction it runs, right? Nope, according to the New York Times:

eBay had $3.19 billion in cash at the end of last year, but $2.8 billion of that money is overseas and would be subject to repatriation taxes if the company were to invest it in its ailing United States e-commerce marketplace, according to analysts.

Luckily, it's found some eager buyers: The founders of the startups it enriched through purchases. Garrett Camp and Geoff Smith (right) have just bought back StumbleUpon, a social-news startup it bought for $75 million two years ago, with the help of some venture capitalists. Janus Friis and Niklas Zennström, the founders of Skype, are hoping to buy Skype for considerably less than the $3.1 billion price eBay paid for the company in 2005.

$390 million in the kitty isn't exactly bankrupt. But it's hardly enough to fund eBay's efforts to fix its U.S. marketplace and efforts to expand into consumer credit with Bill Me Later, an online-lending startup it bought last year.

Silicon Valley venture capitalists and entrepreneurs like to think they're putting their resources behind innovation. But what are they doing here? Funding middle America's shopping habits.

(Photo of Zennstrom and Friis via Joost)

Armstrong's first day is April 7, but according to our source, he's had his eye on the startup for a while: "He's apparently loved it ever since Google, and it would make AOL instantly cool again, since we don't have anything good except for TMZ."

It's not clear if there are any talks, just rumors of Armstrong's desire to get his hands on Twitter. He shares that apparent interest with his former colleagues at Google, who are in the process of getting collectively shamed into some kind of Twitter partnership or acquisition by Silicon Valley's Twitter-happy punditocracy. In that field, though, Armstrong has an advantage: When it comes to buying things merely for their perceived coolness, AOL is absolutely shameless.

Michael Arrington of TechCrunch is reporting that Google and Twitter are in some stage of acquisition talks — either early or late, depending on who you ask — for a sum well above the $230 million price venture capitalists placed on Twitter when they invested in February.

It would be a second Google payday for Twitter CEO Ev Williams, who sold Blogger to Google in 2003, a deal which proved lucrative after Google went public a year later. And he has the benefit of having negotiated a sale to Google before.

Williams's Twitter, which lets users post short updates about whatever thought crosses their minds, is being hailed by the Valley's groupthinking bloggers as a revolution in "real-time search." Much as a stopped clock is right twice a day, occasionally one finds some bit of timely news posted by a Twitter user. (It's hardly a threat to established newsgathering operations, because more often than not, what's posted on Twitter is just a link to some page on CNN.com or nytimes.com.)

The venture capitalists who sank tens of millions of dollars into Twitter, despite its lack of any sincere interest in making money, have cleverly talked up this "real-time" angle among journalists eager for a trend story. The notion of real-time anything is inherently appealing to the Ritalin addicts of the tech and media worlds, for whom instant gratification both takes too long and wastes 15 percent of a 140-character message. And that has gotten Google worried that it might be letting a rival grow in its own backyard.

Already, the buzz has translated into investments and hires for Twitter. It recently poached Google's top designer, Doug Bowman, and hired a computer scientist, Pankaj Gupta, whom Google and Facebook were wooing. Even though Google has laid off hundreds recently, it's still hiring engineers. One more reason to buy Twitter that boils down to pure shame: to plug an embarrassing brain drain.

And one last reason: To spare Twitter's executives the chore of talking about their nonbusiness. On Thursday's Colbert Report, cofounder Biz Stone had to go through a humiliating explanation of how Twitter is building "value" instead of "profit":

Sure, start scoffing. But Digg's past acquisition talks with Current and News Corp. failed in part because they looked at Digg as a media play, and community-generated sites like Digg aren't particularly attractive to advertisers. More recently, Digg and Google got close to an acquisition. That deal fell apart, according to a source familiar with the talks, because Google wanted to closely probe the quality of Digg's engineering staff early on in the deal, and Digg did not relent until talks were well along. (Digg CEO Jay Adelson refused to comment on the company's talks with Google.) The lesson: Digg's not a media company, and not a technology company. It's something else altogether.

Who makes money off of online community? The surprising answer is Amazon. One study suggests that Amazon.com makes $2.7 billion — billion! — a year in incremental sales because of its user-written reviews. Amazon uses the simple mechanism of asking shoppers if a review was helpful to rank its reviews.

It's remarkably similar to Digg's option of "digging" or "burying" a news story. Where might that be useful? Amazon.com's Kindle e-book reader. In addition to selling digital books, Amazon already charges for some news feeds available for free on the Web. Magazine and newspaper editors are delusionally optimistic that they might be able to charge by the article on a device like the Kindle, through a scheme of micropayments.

Micropayments have been technically possible for more than a decade. The problem has always been consumer behavior: How do you know if an article is worth paying for? The time spent pondering that question isn't worth the nickel people hope to charge for it.

But what if you didn't have to ponder that question? What if you knew, through Digg's rating system, that a large number of people had read the story and given it a thumbs-up?

An Amazon-owned Digg wouldn't have to charge for access to its website or the stories it links to; indeed, that would be against its interests, since the rating activity on Digg requires free access to work. The Wall Street Journal even gives Digg users free access to its stories so they can read them and vote.

Instead, Digg would charge Kindle users for a new service which delivers a personalized newspaper to the device — a service far quicker and simpler than the cumbersome process of going to Digg.com and scrolling through endless lists of popular headlines. They'd only pay for the stories they read — which in turn would provide more valuable feedback on what Amazon can charge for. The payment would be essentially voluntary, since readers could always pull up publishers' websites and read the stories for free there — but they payment would be more for the simplicity and ease of use, rather than the content itself. (Arguably, that's why people pay for music on iTunes rather than download it from file-sharing networks.)

Is Amazon.com thinking about such a move? We haven't heard anything about talks between Amazon.com and Digg. But, intriguingly, we heard whispers that Amazon.com is talking to Twitter. Amazon CEO Jeff Bezos is a personal investor in Twitter. Presumably, the attraction would be the same: getting some kind of real-time pulse on what people are interested in.

But Digg's focus on headline voting and Amazon's push into news distribution make them seem like a better match. Will Bezos dig the idea?

(Photoillustration by Richard Blakeley)

That CEO, Mitch Fox, has announced the sale of the company's assets to a new company called 8020 Media Inc. If that sounds fishy — 8020 Media buying 8020 Media — it's because it is. The buyers include Adorama Camera, a New York-based photo chain owned by Hasidic Jews, and a group of Las Vegas investors — all represented by Brandon Calder, a Montana-based venture capitalist. An asset sale usually wipes out the company's current investors — in 8020's case, Minor Ventures, the venture-capital firm run by Halsey Minor, the founder of CNET, who has hit hard financial times himself.

8020 began life as JPG magazine and its companion website, both of which were founded by the husband-and-wife team of Derek Powazek and Heather Champ. Powazek and Cloutier cofounded 8020, which then bought JPG. Powazek was forced out in a power struggle with Cloutier in 2007. Cloutier himself left in a hurry a year later.

Meanwhile, the company hired Mitch Fox, a veteran Condé Nast ad salesman who'd just left the publisher (or been fired, depending on whom you ask), a year ago at a staggering $500,000-a-year salary — a figure Valleywag has verified firsthand through a look at the company's 2008 financials (included below). Fox vastly expanded the company, hiring expensive salespeople, launching a travel title, Everywhere, and preparing a fashion magazine. He more than doubled the company's monthly losses. Closing Everywhere did little to staunch the bleeding. 8020 ended the year with $300,000 in the bank and $3.6 million in losses, and Fox announced that the company was shutting down and putting itself up for sale.

Fox also mishandled the sale. SmugMug, a photo-sharing service, expressed interest in buying the company. But then Fox announced that a host of bidders had shown up — at which point SmugMug executives told Fox they weren't interested in a bidding war. Flickr, Yahoo's photo-sharing service, was also a rumored buyer — until Champ, who had joined Flickr as an employee, shot down the notion that anyone at Flickr or Yahoo was talking to Fox about acquiring the business.

8020's lessons? Don't hire a Condé Nast guy to run a startup, for starters. Studies have found that the best predictor of a startup's success is low CEO pay. $150,000 is the figure many cite. Above that, startups are more likely to fail, as the CEO lacks the proper motivation to turn the company into a success. Had Fox paid himself that much, the company would have doubled its cash on hand. Had he merely kept the burn rate at the level where it was when he took over, 8020 might have had another year of cash in the bank. And had he not tried to deceive potential buyers into thinking he was running an auction, 8020 might have ended up in friendlier hands.

Instead, to the end, Fox has tried to spin 8020's sale in as grandiose terms as possible, comparing its fate to the shutdown of the Rocky Mountain News. Here's the farewell email he sent:

While it's unfortunate that neither Hallmark magazine , nor the Rocky Mountain News could find buyers, we were able to swim against the tide and secure a great buyer, AND form this terrific joint partnership between these two companies with shared strategic objectives.

And now, after a hectic 47 days, hundreds, maybe thousands, of emails and countless hours on the phone and in meetings, I am delighted to report that the assets of 8020 Publishing, LLC (our official name) have been acquired by 8020 Media, Inc., a new company formed by a group of private investors, represented by Brandon Calder, for the purpose of executing on the unique vision that led to the creation of JPG Magazine, jpgmag.com and everywheremag.com. We are also pleased to announce that Adorama Camera Inc., a renowned leader in photography has reached a multi-year agreement to be JPG's Premier Community Partner and will also become minority owner of the new company.

In this difficult economic climate, business transactions take patience, finesse, intelligence and imagination, and we were lucky enough to find all these qualities in the unique group that brought this deal together. Above all, the new owners are able to see the immense promise that these properties hold to re-invent the media model and truly put the voice of the medium in the hands of its community

Adorama is a unique partner and brings an unrivaled passion for, and long-standing expertise in, the photography industry, which will be evident in the numerous exciting enhancements this relationship will bring to the JPG community.

My role, too, is changing, as I am handing the reins of the company over to my colleague, Mr. Seth Familian, who will become President and CEO of 8020 Media, Inc. As the key driver behind our digital innovation for the past year, Seth has proven to be an exceptionally capable new media leader.

Seth's plans for the business are exciting, ambitious and attainable, focusing on creative, yet practical, ways to grow both traffic and distribution, while effectively monetizing both the internet and print properties. I am sure we will all be hearing a lot about how he will develop these, and other properties on their way to becoming world class businesses.

As Vice President of Product Development for 8020 Publishing, LLC, Seth developed deep respect for the industry and the JPG community. Seth recognizes that member connection to JPG is the engine fueling its success, so member enjoyment of the site remains his core priority.

He understands how to provide opportunities that enhance members' experience, and has plans for new ways for members to share their work in many venues, which will all add to the excitement of the site's development and its value over the coming months and years. Additionally, Seth and the team are able to now reinvigorate the commitment to JPG's ‘sister' property, Everywheremag.com and look forward to developing that title while also exploring other potential opportunities for the company's business model. It's for these reasons that I feel the company is in very capable hands.

I will remain involved in the business as a member of the board of directors, and am excited to help Seth and his team in all ways possible to see 8020 Media, Inc. fulfill its promise and our dream.

In closing, I want to express my thanks to all of you who stayed close during this hectic process, and gave us your good wishes. It's always good to have friends checking in at times like this. I also want to thank Minor Ventures, especially Halsey Minor and Ron Palmeri, for believing in 8020 Publishing, LLC initially, and for working so hard to help set the enterprise off on a path that will launch it to the next level of success.

Below is the contact information for those people involved in the business now, so I guess it's time to update your address books.

See you soon I hope,

Until then, all my best

Mitch

8020 Publishing Profit

And a quick one, too, without the troubles of figuring out how to make money off of Internet hipsters' self-indulgent ramblings. Karp has toyed with charging users for extra features, but it's not clear that adding fees would draw much revenue. Nevertheless, Tumblr was able to raise $4.5 million in December, an investment which reportedly valued the company at $15 million.

An incredible amount for such a young startup with such fuzzy hopes of making money. But it's a bargain compared to Twitter, a startup similarly unburdened by the depressing reality of actual revenues. Which is why Yahoo might, just might, be willing to part with as much as $50 million for it. (In a sad recognition of how late Yahoo is to the whole Twitter phenomenon, its PR department set up a Twitter account today.)

We hear the talks are serious, led by Tapan Bhat, a fast-rising executive in charge of Yahoo's homepage and other key properties — but as with any acquisition talks, they could fall apart. Fred Wilson, a partner at Tumblr investor Union Square Ventures and a Yahoo spokeswoman did not respond to inquiries about the talks. In a text message, Karp, confirming his reputation for adorably juvenile sarcasm, wrote, "You got it backwards."

What could kill the deal: Already, Yahoos are grumbling at the idea of spending tens of millions of dollars on a revenue-free startup. The company's spending spree on Web 2.0 startups like Del.icio.us and Flickr has yielded few visible financial results. Some grumble that has more to do with Yahoo's mismanagement of the acquisitions, but the point is the same: Why should Yahoo spend more on startups, having failed to profit from the ones it already bought?

And there's also new CEO Carol Bartz, who is waging a pointless jihad on leakers. She may be angry enough that word of the talks has escaped Sunnyvale that she may kill the deal for that reason alone.

Update: Awww, Karp is adorably denying the rumor of Yahoo's interest in his company! Then again, he also claimed Tumblr was buying Yahoo, so who knows what to make of anything that comes out of his so-cute-you-could-pinch-'em cheeks? His lead programmer, Marco Arment, is also perkily insinuating that he would quit if Yahoo bought the company:

I hope they let me work on some of the many exciting projects at Yahoo! Who needs a high rank at a small company in New York? I want to move to California and get stuck in traffic every day on the way to my midlevel engineering job where I sit in a cubicle all day and can't make any product decisions while working on something nobody will ever see to manage regional ad clickthrough stats tracking.

First the voluble tech blogger, an opinionated chronicler of the obscurest of Web startups, announced BusinessWeek online columnist Sarah Lacy as a substitute writer. Then he said he had to file two more interviews from Davos, the power conference of the world's economic hyperelite. Then he announced another substitute.

This protracted exit makes one wonder: Is Arrington's biggest fear that the Web might not actually miss him? It's a double-edged sword: TechCrunch's overdependence on one outsized personality was a factor in AOL dropping acquisition talks. If he can prove that TechCrunch can carry on without him, then he might be able to unload it on some larger buyer — though surely at a steep discount to the $100 million price he's bandied about. But if he shows that an Arrington-free TechCrunch is a going concern, any acquirer will surely want to fire the erratic founder as soon as the ink dries on the deal, rather than deal with his ongoing emotional outbursts. That would deprive him of the public stature he claims to hate, but so clearly craves. It's a dilemma which is surely the most plausible explanation for Arrington's reluctant exit.

Time Warner has been trying to sell its Internet unit since at least 2005, but Bewkes and his colleagues want a higher price than the market seems to be offering. Meanwhile, AOL's value keeps slipping.

Yahoo's top executives have thought about buying AOL to bulk up against Google — and, depending on who you ask, either fend off Microsoft, or make a more appealing package for Microsoft to buy.

Ballmer flirted with buying Yahoo, but really wants its search business; he'd be happy to pick up AOL's share of the search business, too, especially as it's controlled by Google.

The thing is, all of those statements are as true today as they were a year ago. In a year of round-and-round talks, nothing has changed — least of all, these players. Yahoo has a new CEO, former Autodesk chairman Carol Bartz, but the software executive wasn't in New York.

Fresh blood would be helpful here, to either get a deal done or declare talks off for good. Google has continued to add market share as its competitors dither; advertisers are getting nervous about its growing control of the online advertising business. They'd like to back a rival. But who? Less talk, more action, please. Only Larry and Sergey will be happy if Bewkes, Bostock, and Ballmer meet next year in New York.

A tipster reports spotting the two:

On my way down the elevator, I was stopped on the 5th floor and in walk Roy Bostock and Steve Ballmer. Kind hellos were exchanged. As we entered the lobby they both walked out and seemingly proceeded to lunch together.

An odd couple. Bostock, an adman who now runs Yahoo's board of directors, and Ballmer, the shouty head of the software giant, have spent most of the past year badmouthing each other after a merger deal worth $45 billion fell apart. (Microsoft badly wanted Yahoo's search business, so it could better compete with Google; but Yahoo wanted more money and less uncertainty, since any merger might take a year to get past regulators.)

At one point, a Microsoft flack called Yahoo's recounting of how the deal went down as "revisionist history." Bostock, meanwhile, testily defended himself at Yahoo's last shareholder meeting. And now they're back together, smiling and lunching?

The first conclusion one might jump to: Bostock, having filled Yahoo's CEO chair with a seatwarmer, is ready to cut a deal with Microsoft. Ballmer has already said he'd like to negotiate a deal with Yahoo, and soon. But why would Bartz, a hardcharging, tough-talking sort who formerly served as design-software maker Autodesk's longtime CEO, take the job if she was just going to see the company sold?

A more innocent possibility: Bostock and Ballmer may have agreed to talk as soon as Yahoo appointed a new CEO, and they happened to both be in New York at the same time.

A more disturbing scenario: Bostock is trying to negotiate a sale of the company or its search business behind Bartz's back. A clumsy move, but Bostock, whom many Yahoos regard as an ineffectual "empty suit," might just be stupid enough to try it — in which case Bartz will have to spend her first months battling a rogue board chairman rather than fixing Yahoo's urgent problems. She would do well to oust Bostock, at any rate; as grateful as she might be for the job, Bostock has been a disastrous chairman for Yahoo, from his mishandling of the Microsoft negotiations to his foolish appointment of Yahoo founder Jerry Yang as CEO.

And there's one last twist: The place where they met. Time Warner has long been interested in unloading AOL, its troubled Internet unit, on Yahoo — but only at the right price. And Microsoft might still want to strike a search deal with a combined AOL-Yahoo. Was the popular midtown-Manhattan location just coincidence — or were Bostock and Ballmer also paying visits to AOL's parent? Tips are welcome.

But why? Having taken Google's money for Dodgeball, he gave up the right to have a say in its future. And some startups deserve to die.

Dodgeball enjoyed a brief vogue in 2006 among the early adopters of San Francisco and New York. Quips a person in this set: "Dodgeball died when Twitter took off. Most useful now as a way to see where Andrew Krucoff is getting drunk, or where Rex Sorgatz is getting laid."

For people caught up in the world of Carroll Gardens-to-Mission District microcelebrity, in other words, Dodgeball was a gift. But for Google's hubristic executives, who aim to organize all the world's information, catering to a self-appointed cool-kid set is far too low an ambition. (In 2005, the same year it bought Dodgeball, it also bought a startup called Android; Google is trying to spread the resulting cell-phone operating system into millions of devices.)

Crowley complained that Dodgeball got little support from Google, and noisily quit two years after the sale.

What Crowley, with his entrepreneur's ego, and Dodgeball's self-involved, self-obsessed fans may be too caught up to realize: Google may never have wanted Dodgeball in the first place. Large companies buy smaller ones all the time for a host of reasons: to hire talent, to block rivals from purchasing a company, or even to strangle a threat in the crib. Sometimes, too, they simply make mistakes. (One problem Google has had in integrating startups: Its in-house technology for distributing Web applications across the globe is quirky, and code from outside the Googleplex often requires a complete rewrite before it can work on Google's servers.)

In any event, we're likely to see fewer Dodgeball debacles in Google's future. The market for small Web startups has all but dried up; Google's dealmakers feel less need to swoop in and buy companies lest they go to Microsoft or Yahoo. And Google's informal M&A process, where well-connected early employees could run around with Google's checkbook cutting deals on a whim, is tightening up, we hear. We wonder: Will the Dennis Crowleys of the world be happier if they get to keep their pet projects running, but without Google paying for them?

A ludicrously patchy trial balloon lifted off this week, airing the notion that Microsoft might fund some kind of complex buyout of Yahoo, at a knockdown price of $20 billion — less than half what Microsoft offered last February. It was swiftly shot down: If Microsoft wanted to get its hands on Yahoo, why would it loan someone else the money to buy it?

Another tall tale is making the rounds: that Sue Decker, Yahoo's president, is still a candidate to replace founder Jerry Yang, who's stepping down from the CEO job after a disastrous year and a half. (Anyone care to bet on whether one of the "sources familiar with the search" who told CNET News that Decker was a contender was Decker herself?)

Decker, a former investment banker, wrecked her credibility with Wall Street through overoptimistic forecasts. Never a strong manager, she similarly killed whatever loyalty Yahoos had left for her through her mistreatment of key underlings. (She had Wenda Harris Millard, Yahoo's former U.S. sales chief, locked out of her office over the weekend when Millard told Decker she was planning to leave — and only months later thought to invite Millard to a farewell party, which Millard refused to attend.)

What Decker has going for her: She's already in place, and is a known quantity. If Yahoo's CEO search utterly fails to find an outside candidate and doesn't settle on a board member, Decker is the board's only option. John Chapple, a board member who was previously CEO of Nextel Partners, has said he's no longer interested. One of the outside possibilities, Vodafone CEO Arun Sarin, has reportedly dropped out. Another, former Autodesk CEO Carol Bartz, has yet to express any enthusiasm. But what does it matter that you have a known quantity, when you have taken that quantity's measure and found it lacking? Insiders whisper that Yang, Yahoo's dithering founder, is loyal to a fault, and that's the only reason Decker has not been fired.

If Yahoo ends up with no choice but Decker, it will surely spell the end of the company. What options will she have, other than to sell it at a cut-rate price to Microsoft?

How depressing for a company once worth more than $100 billion, which promised to bridge Hollywood and Silicon Valley and dominate new media. It still has formidable assets, and valuable businesses. Why does no one know what to do with them?

BusinessWeek's Spencer Ante got ahold of Digg's financial statements. They are frightful, even for a startup. Last year, the company took in $4.8 million and spent $7.6 million, for a loss of $2.8 million. In the first nine months of this year, losses grew almost as fast as revenues: Digg took in $6.4 million and spent $10.4 million, resulting in a $4 million loss. At an annual clip, that's more than $5 million out the door a year.

Keep in mind that Digg has a lucrative three-year advertising deal with Microsoft, that pays the site a guaranteed rate for its inventory. Without that arrangement, struck last year — driven, most believe, by Microsoft executives' desperation to get in on the Web 2.0 craze — Digg's losses would likely be far worse.

Now it all makes sense: Digg CEO Jay Adelson's repeated attempts to sell the company to News Corp., Current Media, and Google, at a valuation of $300 million or more, came to naught because there's no real business there. Those sales talks, while they were still under discussion, prompted entirely unfounded speculation that founder Kevin Rose was personally worth $60 million on paper. Instead, Digg took $28.7 million in venture capital at a valuation of almost half what the company hoped to sell for.

To be fair, that will last the company years, even at its current rate of red-ink spilling. But it's worth thinking about Digg's numbers amidst the litany of complaints about the ink-on-newsprint business: newspapers coast to coast are seeing devastating declines in advertising revenue. The New York Times has mortgaged its headquarters. The Tribune Company has declared bankruptcy. And yet, even in their decline, newspapers remain prodigious generators of cash. This moribund industry generated $13.7 billion in profit in 2007.

The same cannot be said of Digg, a site conceived by television host Kevin Rose as a replacement for the editors who pick headlines for readers. On Digg, readers vote headlines up by "digging" them, or down by "burying" them.

For now, Digg is safe, insulated from the marketplace as a well-funded private company. But if Adelson no longer plans to sell the company, he will have to take it public. And when the day comes that investors can vote the company's shares up or down, unless he can engineer a dramatic improvement in its finances, he and Rose will know what it feels like to be buried.

The show features rich people lying to poor people and then giving them money, and it's now up on Hulu. All you need to see are the first 11 minutes. Watch Chahal give a tour of his $6.9 million nouveau gauche monstrosity of a penthouse, and fumble around trying to buy groceries. "Buying groceries, it's not that easy," he says. For Yahoo shareholders, watching him give away tiny portions of his fortune will be far too painful. As deserving as the recipients are, they'll wish Chahal was handing their money back to them.

It's been a grindingly frustrating comedown for what was once the preeminent brand on the Web. Microsoft offered to buy Yahoo for $45 billion in February; the company is now worth a third of that. Miller would pay $28 billion to $30 billion for Yahoo, if he can raise that sum from sovereign wealth funds, the investment pools run by cash-flush Middle Eastern and Asian governments. They are understandably skittish at the idea of paying twice the going rate for a stake in Yahoo.

The notion is that Miller would run the show, and thereby make money for his investors. Fired as AOL's CEO in 2006, Miller has been rehabilitating his reputation as an investor ever since. (He's been amply helped by his replacement, former NBC executive Randy Falco, who has proved to be a thoroughly useless corporate stooge.) But Miller did not demonstrate at AOL what Yahoo so desperately needs: a keen product vision, and a ruthless determination to get his way with dithering engineers.

It's pathetic, really, that Yahoo hasn't yet been sold or found a CEO to replace hapless founder Jerry Yang. The company's traffic is still immense. And it's big in Japan! Someone, somewhere ought to think that Yahoo is worth saving. That Miller is the best Yahoo can find speaks volumes

'Twas always thus. Twitter was never really a company; it was a feature invented at another forgotten startup, spun off into its own venture. The programmer who came up with the idea for Twitter, Jack Dorsey, was named CEO, while Twitter's better-known backer, Ev Williams, a Webhead who struck it rich by selling Blogger to Google five years ago, dithered about how much he wanted to be involved.

Despite Williams' seeming indifference, Twitter took off — so much so that a crush of new users strained its servers, to the point that the service became famous for its technical incompetence. (The "fail whale," a cheery cetacean icon displayed when Twitter's website was unavailable, now appears on T-shirts in San Francisco and Brooklyn.)

In its business affairs, too, Twitter is proving incompetent. Most Web 2.0 startups run cheaply, but Twitter faces large bills from cell-phone companies which charge it for forwarding text messages to cell phones; the more it grows, the more it pays. And it has yet to announce publicly a way to make money.

That's not to say it doesn't have a scheme. The latest one we've heard floated: Twitter would charge companies to have verified Twitter feeds, so users would know that a message from, say, ExxonMobil really came from the oil company. (It's not as hypothetical as it sounds; a Twitter user inexplicably impersonated ExxonMobil this summer.) Verified accounts might then pay Twitter for every message they send, and also get prominent listing in a Twitter directory.

If that sounds like utter nonsense, the fever-dream imaginings of a desperate business-development executive high on whiteboard-marker fumes, that's because it is.

With no real hope of making money on its own, Twitter's best hope is a buyout. But its executives have handled that poorly, too. Dorsey botched talks with Yahoo and then Facebook; he didn't even tell his own board of directors he was talking to Facebook about a proposed $500 million acquisition. After that, he was fired as CEO and replaced by Williams, but stayed on as chairman, a nominal job which doesn't require his presence at the Twitter office. One prominent Silicon Valley investor is fuming that Dorsey is still on the payroll at all.

This Mickey Mouse operation is the future of news? That's not the most frightening prospect. Even if Twitter were competently run and profitable, the end result is an unreadable jumble. Look closely at the coverage, if you can call it that, of the Mumbai attacks on Twitter. Sitting at their desks in the U.S., most people had nothing to add except to observe that Mumbai used to be called Bombay — the kind of message that makes you wish Twitter's length limit was zero characters, not 140.

As more users join, the Twitter feed becomes filled with more and more noise; repetitive retweetings, back-scratching praise, and self-congratulation. A set of amateurs celebrating each other not for the quality or insight of their reporting, but its brevity, swiftness, and modish form of delivery. You read it here on first. Unless you heard about it on Twitter.