So, like, you might assume that interviewer Hank Plante would ask about this mysterious absense from all his official events, and his unannounced, Mark Sanford-style trip to Hawaii. But Newsom just wants to grin and laugh the soulless laugh of a cornered Scientologist, and talk about the budget deficit. It is a terrible, terrible interview, with the rictus smile and the mirthless laughter. And it ends with Newsom removing his mic and bitching, off the record, about how mean it is of journalists to ask what the hell is up with him.

And then the Wall Street Journal reported that Newsom was going to quit politics and go back to his winery. Newsom called the reporter to deny it, but there's no way in hell this guy's remaining in office until 2012.

McCain last night tweeted about how she was spending her evening eating takeout and reading an Andy Warhol biography. To accompany this radical take on an evening in, McCain uploaded a picture of her in her usual home alone outfit of sweat pants and a tank top. And apparently this set of shitstorm of conservative condemnation — apparently young women should not be encouraged by their role model Meghan McCain to expose any part of their breasts, ever — and fat jokes.

So then McCain says she's quitting this awful Twitter place forever, except maybe not really, because she wanted to "sleep on it" and probably woke up this morning realizing she now has the moral high ground again and fodder for a whole slew of new outraged Daily Beast columns:

There's another thing Meghan McCain has that she didn't have "about 16 hours ago," which will keep her on Twitter forever: lots and lots of fresh new attention. For her perky and hugely well articulated political positions, of course. Both of them.

Earlier this year, Love and former Nirvana drummer Dave Grohl sold Cobain's likeness to Activision for use in Guitar Hero, and former Nirvana drummer Dave Grohl and bass player Krist Novoselic signed off on the use of the band's music. But once it became clear that the game lets people make Cobain sing Bon Jovi songs, puppet-like, Everett True, the Melody Maker writer who mythologized the Seattle scene in the late 1980s and introduced the world to Nirvana, called foul via Twitter:

Love, as you might expect, went crazy, replying that she didn't authorize the likeness, and colorfully implicating Grohl:

Here's Rolling Stone, by the way, on Love's participation in the Activision deal:

Naturally, Love did have some concerns. Namely, Cobain's physique, Riley reveals. "Courtney supplied us with photos and videos and knew exactly what she wanted Kurt to look like," he says. "She picked the wardrobe and hair style, which turned out to be the ‘Teen Spirit' look, then we went back and forth over changes - some subtle, some not so subtle." In column B? Love's reference to the Greek God Adonis, whose youthful good looks made the male deity an object of desire. "She certainly had a physical image in mind," says Riley. "She wanted him to have that sort of athletic definition but not overly so." And while Love has long had a reputation for being difficult, Riley's experience was anything but. "She was actually great to work with," he says. "She got back with comments pretty quickly."

Our sister-site Kotaku confirmed with Activision that Love signed a contract giving the company the right to "use Kurt Cobain's likeness as a fully playable character in Guitar Hero 5."

Anyway, Courtney love then unleashed 214 Tweets over a six-hour period—or roughly 1.7 Tweets-per-minute for six hours straight—about True, crystals, Margaret Atwood, and all the people who are out to get her, which is absolutely not the sort of obsessive behavior that someone under the influence of methamphetamine would exhibit.

UPDATE: We thought we'd share this nice note from Steve Martin of the appropriately named Nasty Little Man publicity, pointing out that Grohl didn't have anything to do with whoring out Cobain's likeness for a video game—he only whored out the music:

correct this you assholes:

"Earlier this year, Love and former Nirvana drummer Dave Grohl sold Cobain's likeness to Activision for use in Guitar Hero."

DAVE GROHL HAD NOTHING TO DO WITH THE SALE. AND IT'S DISRESPECTFUL THAT YOU DON'T EVEN MENTION KRIST NOVOSELIC WHO CO-FOUNDED NIRVANA.

He followed up with this statement from Grohl and Novoselic:

This is a statement regarding Nirvana, Guitar Hero and the likeness of the late Kurt Cobain.

We want people to know that we are dismayed and very disappointed in the way a facsimile of Kurt is used in the Guitar Hero game. The name and likeness of Kurt Cobain are the sole property of his estate – we have no control whatsoever in that area.

While we were aware of Kurt's image being used with two Nirvana songs, we didn't know players have the ability to unlock the character. This feature allows the character to be used with any kind of song the player wants. We urge Activision to do the right thing in "re-locking" Kurt's character so that this won't continue in the future.

It's hard to watch an image of Kurt pantomiming other artists' music alongside cartoon characters. Kurt Cobain wrote songs that hold a lot of meaning to people all over the world. We feel he deserves better.

Krist Novoselic and Dave Grohl

We've updated the post above to reflect the distinction, but not the difference.

"EPIC-EST FAIL EVER," reads a headline superimposed on the flag of Brazil and attached to Lacy's latest post on TechCrunch, in which the Yahoo Finance anchor admonishes Brazilian entrepreneurs to "blame your government" for the terrible tragedy of... not being allowed to meet with Sarah Lacy. Amid all her jet setting, Lacy apparently failed to apply for a visa in time, because she was forced to turn to an expediter. But the computers at the consulate were being upgraded that week, so Lacy was shit out of luck.

Her response? Some angry tweets, followed by today's lengthy TechCrunch post, which makes sure to mention how dangerous and underdeveloped Brazil is, as well as how a PR company helped orchestrate her visit, to a place "no one in the Valley" particularly cared about:

It's particularly ironic given that the Brazilian government has recently hired the PR firm Fleishman Hillard to go around talking up its commitment to IT and entrepreneurship. You want foreign investment and attention, Brazil? Here's an idea: LET PEOPLE ENTER THE DAMN COUNTRY. You want to show your IT prowess? How about outfitting your consulates with computer systems that work? ...The country should be embarrassed.

This is definitely the worst thing that has happened in Brazil, ever, Sarah Lacy not being allowed to visit.. "Epic-est fail" indeed. And what's weird about this whole situation is that the word "Brazil" has never before been associated with bureaucratic dystopia. And it's not like the U.S. has a dysfunctional visa system. We're sure if any of this were the case, Sarah, as a professional writer, would have made some reference to it.

(Pic by lunaweb on Flickr.)

We all know that "exhaustion" really means that you're partying too hard (see pic above, taken on June 26 as she exited a London club at 3:30am three weeks before her commitment), but don't want to admit it. Instead, you go with the Molar Defense and try to play us as a bunch of patsies. Even Britney was upfront about going bonkers. In this case, the lie is worse than what she's trying to cover up. Here's what Mischa told Time Out New York in her first Q&A since the hospital.

I went through a terrible surgery-a wisdom tooth surgery, all four removed. It was a nightmare. I've never had surgery before-it all went wrong and I had to have a second surgery and it almost delayed shooting because it was a nightmare to me, because I couldn't deal with the thought of not getting there on time. So with the travel, and surgery and prep for the show-it was hell.

So, was it the surgery that made you look all bloated and strung out in the pictures too? We just want to get on the officially party line here. When asked if it was drugs, she said no. And if asked if her hospitalization taught her how to deal with her emotions or the chronic pain from her botched surgery she says, "Not really."

Just for this, Mischa, we're not watching you play a pill-popping model on The Beautiful Life. Ok, that's a lie, but don't insult our intelligence, OK.

Sporting some kind of hideous quarter-goatee, Kneale, then at Forbes, allowed the Today show to confiscate his BlackBerry, back in 2007. He surely though it would be a glorious publicity stunt on a national stage; that Kneale only lasted 40 hours out of a week indicates he lost control of the situation, and that his on-camera tears were real.

Kneale has trimmed himself up nicely since this was shot, but we hear he's still partial to journalistic theatrics. And NBC is still turning his humiliation into easy buzz.

Page Six reports that Barton's publicist can't even get his gonzo client on the cover of any of the tabloid magazines. What, did OK! have the first pictures of Paz Vega's baby instead?

"As sad as Mischa's recent problems are, what seems to be upsetting her representatives even more is that no one really cares," said the editor

Is that because after the head-shaving, chopper-chasing, ambulance-cramming awesomeness of Britney going bonkers, everything pales in comparison? These are just a handful of the covers that were coming out on a weekly basis in 2007 during Britney's spectacular fall from grace. Just a year later, Heather Locklear barely got any when she started acting nuts.

Running concurrently with Britney during the summer of tabloid gold, Lindsay Lohan was arrested for DUI more than once and was in and out of rehab. She even managed to score the cover of the New York Post and the Daily News on the same day!

Or is it, sadly, that neither of these women are famous enough for their mental condition to warrant our concern? It's probably a combination of that and the lack of a really sensational story, like Anne Heche wandering into people's houses in her underwear babbling about spaceships (remember that?!). See, Mischa, you just didn't go crazy enough.

Regardless of the reason, it looks like Barton is going to have to get on the cover of a tabloid the old fashioned way. You know, by being a good actress, getting knocked up, or having her husband leave her and their eight children to chase floozies around Southhampton with Michael Lohan.

Yes, while most Americans spent the 4th of July dressed in red, white and blue, grilling various forms of animal flesh with their friends and neighbors, going to the beach, perhaps watching other Americans compete in a contest to see who could consume the most processed meats in a ten-minute time frame, Sarah Palin was cranking out an insane letter with some ridiculous Alaskan lawyer which basically threatens to sue anyone who dares to speak ill of Saint Sarah.

What provoked the threat was rampant speculation online that Palin's bizarre resignation on Friday was fueled by a possible embezzlement scandal involving the Palins receiving kickbacks on the construction of their home in Wasilla from the construction company that was awarded the contract to build the Wasilla Sports Complex while she mayor of that town. According to the four page letter from Thomas Van Flein, Palin's attorney, mere speculation on the matter by the media could result in a lawsuit.

This is to provide notice to (blogger Shannyn) Moore, and those who republish the defamation, such as Huffington Post, MSNBC, The New York Times and The Washington Post, that the Palins will not allow them to propagate defamatory material without answering to this in a court of law...Just as power abhors a vacuum, modern journalism apparently abhors any type of due diligence and fact checking before scurrilous allegations are repeated as fact.

But that's not all—Earlier in the day Palin whined about the media's treatment of her on her Facebook page.

The response in the main stream media has been most predictable, ironic, and as always, detached from the lives of ordinary Americans who are sick of the "politics of personal destruction". How sad that Washington and the media will never understand; it's about country. And though it's honorable for countless others to leave their positions for a higher calling and without finishing a term, of course we know by now, for some reason a different standard applies for the decisions I make. But every American understands what it takes to make a decision because it's right for all, including your family.

Of course, as with all things concerning Sarah Palin, none of this would be complete if it weren't laced with delicious irony. To that end, Jezebel dug up a video of Palin talking to Newsweek's Karen Breslau in March of 2008, where she addressed Hillary Clinton's complaints about the media during her campaign against Obama for the Democratic nomination. Palin said that Hillary was doing women a "disservice" by whining incessantly about media criticism.

You gotta plow through that. You have to know what you're getting into...When I hear a statement like that coming from a woman candidate, with any kind of perceived whine about that excess criticism or you know maybe a sharper microscope put on her, I think 'that doesn't do us any good.'

Oh yes. The next few weeks should be a whole lotta fun.

The image associated with this post is best viewed using a browser.

Video via Jezebel
Illustration via the amazing Zina Saunders True Believer

Also he's going to quit, apparently. Some members of the RNC are concerned about handing over the party's purse strings to an obviously incompetent hip-hop enthusiast whom they only hired to be a black Republican on TV, so a move is afoot to restrict Steele's ability to spend money. The state parties are scheduled to vote on it tomorrow, and Steele got all "I Will Survive" and told Fox today that "they can contemplate all they want to, but the reality is if they want a figurehead chairman you can have a figurehead chairman, but it won't be Michael Steele." Um, they actually did want a figurehead chairman. So sorry for the misunderstanding, Mike. We're sure they'll be a great reference and wish you luck in all your future endeavors.

But if he doesn't make good on his threat to walk right out that door, Steele has an excellent solution to his party's troubles: Stop making apologies. "The era of apologizing for Republican mistakes of the past is now officially over," he says according to an advance text. "It is done." You go, girl! So when Steele said in February, "we know the past, we know we did wrong—my bad," that was OK, because it was during the Era of Republican Apologies, which Steele just officially ended. So listen up Republicans: Next time one of you refers to Chuck Schumer as "that Jew," do not back down! Stand up for your beliefs! You are fierce women who deserve only the best!

But the best line in this hilarious speech? The instant classic: "This change, my friends, is being delivered in a teabag, and that's a wonderful thing."

Morgenstern runs Valor Equity Partners, which led a $40 million investment in Tesla in February 2008 and controls a seat on the board. The badly mismanaged electric-car startup quickly blew through Valor's money; by October, it was down to $9 million in cash. Despite raising more money from investors, Tesla is running on fumes, and collecting deposits for its Model S electric sedan, a car which exists only as a barely drivable quasi-prototype. Tesla requires hundreds of millions of dollars more than it has to make the Model S a reality — which is why Morgenstern's talk of new money is so interesting.

Morgenstern is briefly visible in the video, apparently recorded by an unknown Tesla fan who hopped in with Morgenstern when offered a test drive, and his face matches another published photo. A Mexican restaurant in Highland Park, a suburb north of Chicago, briefly appears in the shot. According to public records, Morgenstern's family foundation is based in Highland Park. The car is one of Tesla's Founders Series, the first built, and Morgenstern has been reported as one of the buyers in that series. He did not return a message left for him at Valor.

As he pulls away from the restaurant, Morgenstern takes a call and mentions that he's driving around Highwood, a nearby suburban district. During the ride, Morgenstern took a call and discussed Tesla's finances, including rumors previously reported in Valleywag that Tesla was about to take money from a strategic investor. Morgenstern expressed confidence that the deal would be announced Monday or Tuesday. Other sources Valleywag spoke to are less sanguine. Tesla CEO Elon Musk is loathe to surrender control of the company to someone — and yet a new investor would be understandably reluctant to invest if Musk's replacement as CEO weren't a condition of the deal.

So here's the question: Is the video a genuine scoop — or a hoax staged by Tesla?

It does seem curious that Morgenstern's phone just happened to ring seconds after he starts cruising down the street. But if it's a hoax, it's a very foolish one. For one thing, investors don't like their deals getting leaked before the ink is dry. A leak like this, if intentional, may well scuttle the deal, or weaken Tesla's negotiating stance.

And then there's this: Morgenstern uttered something particularly damning on the phone. He said the investment will "make people believers that the sedan will be produced."

Not, mind you, actually allow Tesla to produce its new Model S. It will merely make people believe that it will. That could be read as encouraging optimism among potential buyers. Or it could be read as an intent to deceive people into handing over deposit money for a car that Tesla currently cannot build. Would he really have said that if he knew he was being taped?

Clarium's strategy is to take advantage of supposed distortions in the market caused by government intervention. But the New York State Common Retirement Fund has intervened more directly in Thiel's fund, investing $8 million over the course of three months last spring — just in time for Clarium's holdings to crater from $7 billion to $2 billion. The market meltdown didn't help, but Clarium's stated strategy should have thrived in last year's environment, given the Bush administration's repeated attempts to prop up Wall Street. But perhaps it's a sneaky stratagem to bankrupt the government!

While mismanaging public money, Thiel has also made sure he won't be refilling the state till anytime soon. Thiel is actually far less rich than people think. (A Clarium insider tells us, for example, that there's no way he's a billionaire, as Forbes has reported.) His single best-performing investment is not Clarium, but rather his personal 5 percent stake in Facebook, which he purchased for $500,000 and is now conservatively worth $100 million. Sources at Facebook and Clarium confirm that Thiel holds his Facebook shares through a Roth IRA, which allows tax-free withdrawals on his retirement. He'll have paid at most $175,000 in taxes on that fortune. Getting the government out of one's pocketbook — it's every libertarian's dream!

And perfectly legal. Thiel believes neither death nor taxes are inevitable. (When he's not hacking the IRS code, he also funds longevity research.) The only downside? He might be too clever by half. When word gets to Washington of his tax maneuver, populist-rage-filled Congressmen may well call for an end to the Roth exemption. The taxman cometh.

Google executive Omid Kordestani, the company's sales chief, wrote in the offiicial Google blog that cuts are concentrated in Google's sales and marketing operations, as tipsters told us earlier, and that the company had "overinvested" in areas where it had forecasted growth — growth which is not materializing. One source writes that the division that used to be DoubleClick before Google acquired the banner ad-sales network in 2007 was especially hard hit with more than 50 jobs eliminated in New York. Other sources say layoffs are spread throughout the Google empire; we've heard of at least one cut at YouTube.

A tipster writes:

A friend of mine in the San Francisco office's AdWords division (who wants to remain nameless) was laid off this morning. She also said there were 200 people total. They are still on payroll for two months and have the opportunity to apply for other jobs within the company. If they don't have another job at the end of the 60 days they get a severance package.

The 60-day payroll period sounds consistent with the advance warning an employer would be required to give employees affected by a mass layoff under state and federal laws known as WARN acts. If you know more, drop us a line.

Roubini, a doomsaying economist who's as well-known for his Tribeca loft parties as his increasingly grandiose predictions of worldwide economic collapse, took a break from wooing young women on Facebook to post a few photos of a copter ride in Brazil. (He simply had to spring for a helicopter "as Sao Paulo car traffic is THE worst in the world.) Check out who he hung out with: New York Times loan shark Carlos Slim Helù, disaster-exploiting hedge fund manager John Paulson, and demise-of-empire chronicler Niall Ferguson. They know all about meltdowns, too!

That's not a "major" layoff, as one Valleywag tipster maintained this morning. As Eric Savitz points out in Tech Trader Daily, Apple would have to file through the WARN Act if it was going to conduct major cuts. But the WARN Act does not generally apply to layoffs of fewer than 500 employees.

Perhaps the cuts felt major to workers within Apple's unloved enterprise group. Why is that division getting the business end of cutbacks? The least sexy part of Apple, selling servers and other products to corporate customers, has never gotten much attention inside or outside the company. Steve Jobs has never particularly cared about business customers — in fact, he once ridiculed them as lemmings in an '80s-era Apple ad (see clip above). Even though he's ostensibly on medical leave, the cuts in Apple's enterprise sales are a pretty good sign he still has his hand on the tiller.

Update: An Apple spokesman has denied the layoffs.

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

Phoenix ostensibly visited New York on Wednesday to promote his new film Two Lovers, but the movie proved secondary to the faux-enigmatic persona that left the actor muttering nothing in particular between long, awkward silences abetted by David Letterman himself. The results speak for themselves, as did Casey Affleck's camera-wielding appearance at the day's earlier press rounds in New York, which we hear wound up having even less to do with Lovers than Phoenix's hirsute, gum-depositing late-night escapades. So enjoy what promises to be the last of the star's half-assed film interests, at least until Darren Aronofsky digs him out of hiding 20 years from now for a moving, Oscar-ready comeback. We'll be waiting. [CBS]

A memo from Neil Chase, one of Battelle's top lieutenants, explains the move as a strategic shift, with FM downplaying regular banner ads and playing up "conversational marketing," a fancy term for the kind of shilling that's common for radio hosts but considered verboten for print journalists.

Famously, Battelle got dozens of top bloggers to recite a Microsoft slogan in one of his "conversational" campaigns; several quit the campaign after Valleywag exposed their participation. More recently, Battelle has signed up less difficult spokespeople; a recent campaign for Intel features so-called "social media marketers" — PR and marketing consultants who are used to promoting the wares of paying clients.

Advertisers pay well to borrow bloggers' credibility. But getting them to purchase advertising on their sites? A far more difficult business. Online ad rates have been dropping fast, a result of ever-expanding supply and recession-softened demand. Federated Media had to discount rates last month, and lost a key customer in Om Malik's GigaOm, a tech blog network. No wonder Battelle wants to get out of the cutthroat online ad-network business, and focus on selling his customers' reputations instead.

Here's the memo:

Dear Authors,
We've been preparing for a tough 2009 by talking extensively with advertisers, agencies and authors about what's changing and how we need to adapt to do well in a tough economy. We've learned a lot, and today we're acting on it.

Sometime in the next hour or so, John will announce on the FM blog what we're telling the staff right now: A small number of employees are leaving FM today. We're sad about losing good people who have made valuable contributions to FM. We honor their service, we wish them well, and we'll do everything we can to help ease their transition.

Today we're changing FM to better support the conversational, customized programs that advertisers tell us they want. They're asking for more innovation, new ways to engage more deeply with your audiences, additional conversational tools and better measurement of results. While we're losing good people who primarily supported basic advertising campaigns, we're moving people within the company and adding new positions to beef up the teams that run our most complex projects. That means more help for engineering. It means additional project managers for conversational campaigns.

It means reassigning some salespeople to better serve those advertisers who told us they want to take advantage of the downturn to win market share from competitors.

John's post will explain more about these changes, and I'll be in touch again next week to introduce a new face on the Author Services team and tell you about some improvements in the ways we'll work with you when you're participating in conversational campaigns. Please contact me with any questions or concerns.

As always, thanks for being our close partners.
All my best,
Neil

In the last dotcom bust, Google's managers quite deliberately kept hiring while almost every other tech company shed staff; they were a legendary beacon of hope for Silicon Valley's unemployed engineers. And when Google filed to go public, cofounders Larry Page and Sergey Brin made grand promises about treating their employees well — upping spending on perks and pay over time, rather than cutting them.

Page and Brin have spared their employees by firing contractors by the thousands, from Google's free cafeterias to its in-house tech-support kiosks. But the pain of the economy has at last hit Google's staff. (Google has only had one previous staff layoff of note, eliminating superfluous employees after acquiring DoubleClick.)

The recruiters are surely the first wave of layoffs. Some analysts estimate that Google, which has spent freely on frivolous side projects, could run its business with a quarter of the employees it has now; the sheer profitability of its search-advertising monopoly has hidden its inefficient experimentation for years. Google's first real layoff will not be its last.

Update: And sure enough: Google has closed an engineering office in Austin, five months after it opened with a lavishly catered party, as well as others in Norway and Sweden. It is also, quite sensibly, shuttering little-used products including Jaiku and Dodgeball, two services similar to Twitter but without its adoption.

The quirky site, part blog and part social network, is best known for its users' weird obsessions — like the troublesome clique of Harry Potter erotica writers, whose outré tastes ran afoul of LiveJournal's efforts to comply with U.S. child-pornography laws. (Oddly, the site also gained a following in Russia, which led to its acquisition by Sup.) All that adds up to an environment even more distasteful to advertisers than the typical social site.

The company's product managers and engineers were laid off, leaving only a handful of finance and operations workers — which speaks to a website to be left on life support. Matt Berardo, a Yahoo executive hired on last summer, has also left.

The company's Moscow-based management has told employees it blames the "global economic downturn" — the kind of pat excuse every boss is giving for layoffs, even when mismanagement or a bad business plan is really to blame. The brutal, abrupt cuts suggest something different: That Sup founder Andrew Paulson (above), who paid an estimated $30 million for LiveJournal a little over a year ago, has realized his expensive mistake in buying at the top of the bubble. Someone familiar with the company tells us Paulson lost the CEO job last summer to Annelies van den Belt, a former News Corp. executive, and was given the meaningless title of chairman; he's essentially out of the company now.

Executives at Six Apart, the blog-software company which sold LiveJournal to Sup, are happily counting the money in its bank. And they should consider themselves lucky that Vox, the LiveJournal knockoff it started, hasn't been more popular. At this point, having a larger social network in the portfolio would be a drag on the company's value.

LiveJournal, founded by engineer Brad Fitzpatrick in 1999, predated most blogging services and social networks, and anticipated many of their features. (Some of Fitzpatrick's software is vital to the operation of Facebook and other large sites today.) But Fitzpatrick never figured out how to turn it into a business. Instead, he sold it to Six Apart, which didn't have much more luck.

The weakest in the herd are always the first to fall. Facebook and MySpace, so far, have resisted layoffs. A host of also-ran social networks — Hi5, MyYearbook, and other obscurities — could be next. It's only a matter of time before investors reach the same apparent conclusion as Paulson: that there's a lot of fuss in running a social network, but not that much money.