All Things Digital

Jerry Yang and Co. say Microsoft (MSFT) was never committed to a whole-company acquisition of Yahoo (YHOO). But if that’s the case, why is it that Microsoft seems entirely committed to a whole-company acquisition of another search company–Powerset?

This afternoon, Microsoft said it will acquire the search start-up for a sum believed to be more than $100 million.

Coming as it does in the aftermath of Microsoft’s failed effort to buy Yahoo, the acquisition is an interesting one. Powerset is no Yahoo. That said, it’s in some ways better.

Powerset specializes in so-called “natural language” search, which is meant to understand the intent and meaning behind the words in search queries–so that, for example, a search engine could understand the difference between a search for “yahoo” the exclamation, and “Yahoo” the search company Microsoft didn’t buy. Powerset searches the Web–well, at this point, just Wikipedia–semantically. And that’s a handy skill to have when your competing with Google (GOOG), which isn’t yet able to search the Web in that way.

Said Harvard Business School professor Andrei Hagiu, “Microsoft’s acquisition of Powerset makes perfect sense and is probably the best shot at a disruptive technology that might allow it to leapfrog Google.”

The Damoclean sword of workforce reductions suspended above Yahoo will fall within the next few weeks. This according to Silicon Alley Insider, which claims Yahoo will indeed move ahead with the “emphasis reduction” it hinted at last week and sack between 1,500 and 2,500 employees.

A source close to the company tells SAI that Yahoo has finalized its list of layoffs and will announce them during its fourth quarter earnings call tomorrow. Tough to say what sort of effect they’ll have at this point, given the shape Yahoo’s in these days. Certainly, CEO Jerry Yang has to do something. Since he took over, Yahoo shares have lost more than 22%, trading at $21 at this writing.

“We won’t know the financial implications until the layoffs get announced,” says Steve Weinstein, an analyst with Pacific Crest Securities. “But if it doesn’t, the expectation will grow exceedingly. This is a stock that was at $40 [two years ago]. You’re seeing investor frustration. Yahoo has to find ways to regain momentum.”

Or maybe, as Bubblegeneration’s Umair Haque suggests, it should just throw in the towel. “Yahoo’s problem is DNA,” writes Haque. “Yahoo, you’ve held back thousands of very talented people for the last five years and prevented them from making the fullest use of their talents and insights. … You guys all let Terry Semel make the third fundamental error of strategy–to mistake deal-making for strategy. In the process, you sold out a deeper set of principles; you forgot that the job of a revolutionary is never to sell out, and the point of a strategy is fundamentally to create new value. … The fundamental assumptions behind your thinking are deeply in error, and so your strategy is in massive decay. So please, don’t put up a fight–let these guys go build the cool start-ups and pioneer the radical innovation you’ve stifled and suffocated for the last half-decade.”

Ribbit is as much “Silicon Valley’s first telephone company” as the region’s first to boast a silly name and grandiose claims.

Still, the Silicon Valley start-up, which officially opened its Web-based telephony platform to third party developers this morning, is generating a lot of buzz for its Flash/Flex-based telephones (see video below), and rightly so. The company has essentially built a software version of an operator-class telephone switch that connects Internet-based voice communication services with mobile and landline phones and other Web-based phone applications.

Using its Ribbit API, developers can write applications that support full telephone capabilities–voice mail, call-logging, text-to-speech transcription services, etc.–and because they’re Flash/Flex-based, they can be embedded into Web sites and integrated into Web-based services.

“What we have done is made voice an object that you embed into your workflow (or software),” said Ribbit CEO Ted Griggs. “We didn’t want to change how people did things, like communicate via Skype, and wanted to integrate the platform to work with any phone.”

Smart, eh? But how’s the company going to make money? Ribbit says it plans to charge for services like calls to traditional landlines, voice-mail transcriptions and billing. A reasonable plan, but as Ovum analyst Brett Azuma notes, an unproven one. “Unless there’s a foolproof way to get the products out there and make them successful,” Azuma told Wired. “I think the consumer applications are a little unclear for now. Being able to use text-to-speech transcription services and archive voice calls are many of the features that consumers have shown interest in over the years. However, whether or not they’re willing to pay for these features is going to be the big question.”

Zingku, Jaiku. Jaiku, Zingku. Sounds like the makings for a reprise of David Letterman’s infamous Academy Awards “Oprah, Uma” gag. But really, they’re the names of Google’s latest acquisitions in the wireless communications space.

In late September Google purchased mobile social-networking start-up Zingku. Now it’s gone and bought Jaiku, a Finnish company that offers an “activity stream and presence-sharing service” similar to the more widely known Twitter. Two months. Two mobile social-networking start-ups. Google never explained its plans for Zingku. What’s it going to do with Jaiku? Who knows …

“We plan to use the ideas and technology behind Jaiku to make compelling and useful products,” product manager Tony Hsieh wrote in a post to Google’s corporate blog this afternoon. “Although we don’t have definite plans to announce at this time, we’re excited about helping drive the next round of developments in Web and mobile technology.”

Ah. Helping to drive them the way you drove Dodgeball? To that happy place where social-networking apps go to die? Kidding, of course.

Anyway … Why did Google choose Jaiku over Twitter, a similar company with far greater brand recognition? “The answer seems pretty obvious to me,” says Tim O’ Reilly. “Jaiku isn’t a ‘lifestreaming’ company per se. They are a mobile company in the business of creating smarter presence applications. Far from being a runner-up behind Twitter, they are a leader in a category most people haven’t fully grasped yet. Google is clearly thinking a lot about mobile, and so they do grasp it.”

Of course, there’s another answer to that question as well. Twitter founder Evan Williams, whose previous company, Blogger, was acquired by Google in February 2003, may not have wanted to see another of his creations doomed to irrelevance by the search giant.

Which is not to say Twitter won’t be acquired. As RedMonk analyst James Governor points out, the company is probably looking pretty good to Yahoo right now. “Google and Yahoo are in dueling acquisition mode, and Yahoo is almost certain to respond,” said Governor. “Especially since Twitter has begun to use a footer on SMS messages it sends out–which could of course be used as a microbillboard.”