It's Either Tim or Arianna. The Center Cannot Hold.

Tim Armstrong and Arianna Huffington are locked in a Shakespearean battle for control of AOL - only Armstrong doesn't know it yet.

Read the full Forbes post.

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What Does Tencent Want With MySpace?

By Eric Jackson, Senior Contributor04/13/11 - 06:11 AM EDT

NEW YORK (TheStreet) -- There are new rumors out in the last week that Chinese Internet giant Tencent is talking to News Corp. (NWS_) about buying the once-hot social networking site MySpace.

MySpace is a shell of the company it once was. News Corp. bought it at what now seems like a bargain basement price of $500 million in 2005 and rode it up to many multiples of that in terms of valuation. However, it is likely News Corp. would get little to nothing now.

The company has fallen far behind Facebook; it is not even thought of as a distant competitor. It has cycled through many different leaders since the original founders Chris DeWolfe and Tom Anderson left the company. Whatever magic was once there has left.

TechCrunch recently reported that MySpace's unique visitors dropped 14% between January and February, increasing the pace at which the company is losing users.

So why would Tencent want MySpace? Interestingly, it is both Tencent and DeWolfe who are supposed to be close to bidding on the company.

Obviously, DeWolfe believes that he created the original magic of MySpace and he can bring it back. For Tencent, it's a little more complicated.

Tencent is now a $50 billion company; it is no shrinking violet. It is an Internet giant that trades places with Baidu(BIDU_) constantly for which is the largest Chinese Internet company.

Although Tencent isn't as well known in the U.S., it is actually a bigger social networking service than Facebook. Tencent has well more than 650 million users of its QQ service.

Back in China, Tencent is facing competition from Sina and its Weibo service, but Tencent is still almost 10 times the size in terms of market capitalization.

With buying MySpace, Tencent seems to be eyeing global growth. There have been other moves by the company that suggest this. Earlier this year it bought Riot Games, a Los Angeles-based online gaming company, to add to its mix of games offerings.

However, MySpace would be the biggest external move yet by the Chinese leader. Tencent likely sees a way of growing its QQ service internationally through a more recognizable brand. With DeWolfe's help, it also probably suspects it can rekindle some lost magic to the company.

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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What Do Yahoo!s Think? What's Right and What's Wrong at Yahoo!?

Throughout these past weeks of the Yahoo! proxy fight, we've heard a lot of opinions about Yahoo! from lots of stakeholders except one group: current Yahoo!s.

We've heard Roy Bostock and the board defend themselves for the handling of the Microsoft deal. We've also heard Microsoft's side of the story.

We've heard from Carl Icahn, through his colorful letters, and other shareholders including me. We've also heard from Jerry and Sue Decker.

We've even heard from the stock analysts and industry analysts -- even though they have no skin in the game (although neither do some members of Yahoo!'s board -- but Mr. Bostock and Mike Callahan assured us on Friday that those board members now follow a rule that they have 3 years in which to get some skin in the game).

But, we have never really heard from the Yahoo! employees through these haggard last few weeks. Some might argue, they have the most skin in the game of any Yahoo! stakeholder.

For investors, we have diversified portfolios. Yahoo! is but one position in many we hold. For employees, Yahoo! is their livelihood. They have the most to gain if the company turns itself around; and the most to lose if it doesn't.

The press always wants to hear from this group to round out the varied points of view they display in their stories. But employees decline, for fear of their jobs.

Occasionally, you see a comment from a Yahoo! employee leaked to Kara Swisher, TechCrunch, or Valleywag. However, there is no place where a community of Yahoo! employee voices can converge to speak (anonymously) in a way which allows thoughtful exchanges of points of view.

For example, Jerry says that Yahoo! has a plan and is executing against it. I have heard from several Yahoo! employees that execution is (and has historically been) a major problem. Who's right? Maybe I spoke to a few people with axes to grind. Maybe the vast majority of the 14,000 Yahoo!s agree with Jerry - or maybe they don't.

As a shareholder, I sure would value reading their opinions in their full text, unedited. Because, here's the thing: pointing out a problem doesn't make it worse, it helps fix it. If there's a problem, shine a light on it. Sunlight is the best disinfectant.

Therefore, I would like to offer this blog "Breakout Performance" for such a purpose -- pointing out what's right and what's wrong with Yahoo! To do so, feel free to comment anonymously to this post. Or, if you prefer, send me an email and I will post several comments (without email addresses) in future posts to this site.

If you like this idea but prefer to share your thoughts on a different site or in a different way, let us know below the means you think would be most effective. I don't really care where the comments go.

Let me strongly state that I think it's important that they be in one spot. When different voices of employees get scattered across Valleywag, Swisher, TechCrunch, Silicon Alley, and other outlets, they lose their power, because most will read only one here or there, not all of them together.

Let's hear from the employees who are the heart and soul of Yahoo! What's right and what's wrong with your company? Feel free to complain if you think it's deserved, but let's also be constructive. What needs to change and how could it change? What specifically should happen to make this company great again?

You tell us. Don't let us tell you.

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What Have We Learned from Friendster?

Kudos to Gary Rivlin at the New York Times for his great piece yesterday on Friendster. If you didn't see it, the original article is here, and the follow-on coverage from Michael Arrington is here.

It is a great tale of how Jonathan Abrams (pictured left) started the site as a way to get a few dates, turned down a $30M buyout offer from Google (which would be worth around $1B in GOOG stock today), and opted to raise VC money from John Doerr of Kleiner Perkins and Bob Kagle of Benchmark -- trying to create the next big thing. However, the bigger buyout offer never came, Jonathan Abrams is gone, and Friendster did a recap in the Spring with DAG Ventures.

There are several lessons to be learned from the Friendster fiasco. They seem to connect well with recent research I've published on the Breakout Performance blog on the drivers of VC-Backed firms' sales growth, as well as comments we've made here on the topic of "Why Smart Executives Fail" and the 'Seven Habits of Spectacularly Unsuccessful Executives.'

Here's the abridged version of lessons learned from Friendster:

1. Never forget basic blocking and tackling. In our research, we called this "basic attention to detail" -- something Jeff Bussgang has discussed. If the Friendster site doesn't load, who cares what Yahoo and Google might do next according to the SWOT analysis?
2. Even with bluest of "blue-chip" VCs, success can never be taken for granted. None of us has the Midas-touch -- even John Doerr and Bob Kagle. Managers and directors alike need keep a spirit of "proactive paranoia" alive in all discussions. Succes is taken and kept; it's never handed over easily.
3. Even if you're the smartest CEO in the world, arrogance can be a company-killer. It's not intellect which gets companies into trouble; it's arrogance. Listen to a comment to Arrington's post on Techcrunch in response to his covering this article: "I remember shortly after Friendster launched, and Jonathan Abrams was responding to comments — I made a few suggestions about how it might be a good idea to integrate blogs and rss feeds. My suggestion was laughed off by Abrams as being ‘too geeky’ for their audience — and his arrogance was clearly apparent. I stopped using Friendster from then on."

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Google, YouTube, Shona Brown, and Galaxy

What does the Google acquisition of YouTube have to do with the Galaxy? If you thought it’s going to be a way that a new feature from Google Earth will be integrated into Google Video post-YouTube, you’re wrong. The YouTube acquisition is Google's Second Act; the first product that, although similar and adjacent to Search, will be a category-killer for Google within a second distinct realm from Search. It also is Google's and Shona Brown's answer to how the company can avoid becoming another 'Galaxy.'

Shona Brown is Google's SVP of Business Operations (and some call her GOOG’s ‘chief chaos officer'). I had intended to write this blog posting profiling Shona as one of the top unsung heroes in business today. Then, Adam Lashinsky of Fortune beat me to the punch with a fantastic profile last week. (Nice to see that one of the off-shoots of the recent GOOG – AOL advertising deal is that the Fortune reporters are able to get some great access to Google execs.)

When you think of Google, you think of the Brin-Page-Schmidt triumvirate. Then, you probably think of Omid Kordestani (head of sales); then, coming on strong – especially in the pages of Valleywag – Marissa Mayer. Left out of the discussion, until Adam’s piece, was Shona Brown.

Shona is someone who it’s easy to feel intellectually inferior to, once you understand her background: Rhodes Scholar, Ph.D. in Strategic Management from Stanford under one of the best management scholars in the world today (Kathy Eisenhardt – who has been studying fast-growth Silicon Valley firms for over 20 years), McKinsey partner, Business Best-Selling Co-Author, and pre-IPO member of Google’s management team. In other words, just another brilliant Google employee; they pride themselves on their intellect. However, she’s also someone who is very down-to-earth and helpful.

At Google, she’s responsible for optimizing Google’s internal structure. She decided to take her main findings of her dissertation, which led to the book “Competing on the Edge,” and apply them to Google. (Who says consultants can't practice what they preach.) She found that the optimal organizational design is not too much formality/structure and not too fast-and-loose. (There is new research my firm has done that has found further empirical proof for this assumption. Some details are contained here.) The process by which she does this is partly described in the Fortune article. However, there’s another aspect to Brown’s job described in the article. And, not to put too strong a point on it, it is to solve the greatest challenge facing Google today: how to avoid the fate of being a one-trick-pony.

Google does Search. And it does it better than anyone else on the planet. Remember all the talk around the IPO and even up until about a year ago about how Microsoft was going to come after them? You don’t hear that talk any longer. Google’s won Search. Their multi-billion dollar empire is paid for by search advertisements. Though this preeminent position has given them the ability to develop a cadre of new products (and some, even within Google, think they created too many products), none has been a category-killer in the way that Search has. Much has been written about Google using its Search position to decouple users from the desktop and MFST’s control; yet, this is all still talk today. They have been a very successful one-trick-pony.

That’s where Shona Brown comes in. In her qualitative, case-study approach dissertation, she studied – over 10 years ago – a curious Silicon Valley company that experienced explosive growth and lots of bright young college kids, but had difficulty moving beyond their initial hit product to a 2nd product of similar success. In the end, their core product faced competitive pressures and they were not able to continue. She doesn’t name the company, but calls it “Galaxy.” As Lashinsky points out in his article from Fortune, Google and Galaxy share several interesting common traits. The question you are left to ponder is will Google find a Second Act?

The other night, I was ironically on YouTube and watched the now somewhat dated 60 Minutes glowing segment on their success. Lesly Stahl gushes about how she can text-message Google on her mobile phone to find the nearest pharmacy on the Upper-West Side. Although this is a “nice to have,” along with other Google products like Froogle, Google Earth, and Google Talk, none is yet a “must have.”

There’s always going to be another competitor coming along to challenge Google in search (for the current darling of Silicon Valley in this category, read this TechCrunch posting), even though their lead seems insurmountable today. So, they do need a Second Act. What will it be? Shona Brown and others at Google have been working hard to solve that question and yesterday we got the answer: YouTube.

The YouTube acquisition will be the transformative for Google. They immediately vault to the lead of controlling the search for video on the web. However, more than search alone, they control content in the format that will be increasingly be the preferred way for viewing. But this deal gives Google the first global brand beyond Google. It also allows Google users to interact in a way that hasn't been possible to date.

It's breath-taking to see how quickly YouTube has grown to dominate a space that was not a space more than 5 months ago. It is a wonderful day for their founders and backers, but this is a landmark day for Google and Shona Brown. She wasn't part of the conference call announcing the deal. But her hands are all over this. The analysts can discuss the synergies and do their projections. Shona can simply turn to her colleagues and say that "Google will be no Galaxy; this is our Second Act."

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