There was a time - oh, about April 1999 or so - when Amazon (AMZN) could do no wrong. It occupied a place in the public imagination now equivalent to that of Google (GOOG): the Net company that could. Every oracular word from the lips of Jeff Bezos was treated with fawning reverence (except maybe by those cranky Barron's boys) and a gold-plated future of what was quaintly called "e-commerce" seemed like a sure thing.

And we're living in it, sort of. Only it's no longer necessarily Amazon's to own, and frankly the blogosphere is wondering what that company has done for us lately. As The Browser's colleague Parija Kavilanz pointed out yesterday, while Amazon is on its way to a very merry fourth quarter, traditional retailers like Sears and Penney appear to be catching up in online sales.

Maybe that's why people are starting to bristle against Amazon's relentless PR machinery. Marek Fuchs at TheStreet.com had a feisty column yesterday, complaining about the media tendency to rewrite Amazon's "best Christmas ever" press release and pass it off as news. Then Jeff Matthews weighed in today with a downright nasty post noting that Amazon has essentially issued the exact same press release after every Christmas at least since 2002. "Maybe Amazon's P.R. minions should save their dry powder for the day the company does not experience its 'Best Ever' holiday season," snarls Matthews. "They'll need all [the] spin they can get when that happens."

But that's not the best part. No, the best part is the comment on Matthews' post signed by someone claiming to be "Sam E. Antar (former Crazy Eddie CFO and ex-felon)". Now if you're too young or too far away from New York to remember the rise and fall of Crazy Eddie, take a look at the Wikipedia entry. The Browser does not in any way endorse unfair comparisons between corporate spin and corporate fraud, and certainly we've never heard of Bezos doing anything like showing up for a business meeting with a 100-pound German shepard named Sugar. But Antar's comment, well, it kinda made our day.

In case you missed it, the Second Life backlash is in full swing, with no less formidable a figure than NYU professor Clay Shirky attacking the mainstream media for accepting Linden Labs' figures for how many people have signed up with the virtual world. Clay argues that the business press has become "a zombie army of unpaid flacks" by simply parroting the claims that Second Life now has about 2 million registered users. He specifically singles out BusinessWeek, the New York Times, USA Today, and these pieces by The Browser's colleagues at Fortune and CNNMoney. Clay has also mixed it up with Business 2.0's Erick Schonfeld here.

Clay's fundamental argument is that the press has done a grave disservice by failing to distinguish between SL's registered users, and the number of people who are actually active residents, which is clearly much lower. Moreover, he attacks the fact-checking process for failing to pick up on this discrepancy, and predicts that the press will either ignore his critique, or shift their coverage without ever pointing out their own shortcoming. He challenges the media to inquire about actual users, and then says "I realize I might as well be asking Business Week to send me a pony for my birthday."

Before The Browser responds, one quick correction to Clay's post: the vast majority of publications he refers to do not, as it happens, employ fact-checkers. Fortune does not, CNNMoney does not, and no daily newspaper we are aware of does or ever has. Whether they should or not is a matter for another day.

But look: basically, Clay's right. You cannot write a comprehensive article on SL without pointing out this discrepancy. It's hardly unique to SL; back in the days when The New York Times was first ramping up its Web site, for which you had to register, I used to have a joke: the Times claims to have 8 million registered users, and I'm seven of them. I'd simply forgotten my password often enough that I'd just signed up with a different log-in, and no one at the Times ever asked me to get rid of the older log-ins.

In the case of SL, anyone who's tried to sign up can tell you in a second why lots of people clearly don't come back. The registration process is intimidating, and the site simply will not work if you are, like us, behind a corporate firewall.

Do the numbers really matter? That is, isn't the SL phenomenon valid even if the real number is 500,000 active users or even 100,000? Clay set a trap on this point, predicting a wave of stories that would try to argue that the numbers are immaterial. So we'll sidestep that, and ask what you think.

Lest there was any question that the Nintendo Wii is the peoples' choice in the game console bake off this holiday season, we submit the following under the heading "You Know You Have a Hit When..."

• ...when hip bloggers like Jason Kottke launch Celebrity Mii competitions. (See Ruth Bader Ginsburg at right.)
• ...when hip online stores use Sony PS3 boxes to spell out "Wii Rox!" - and an image of the propaganda makes its way onto Gizmodo.
• ...when so many people are using the nifty new motion-sensing remote controllers around the Christmas tree they notice those little white fairy lights can wreak havoc on the motion sensing electronics.
• ...when small Norewegian software companies migrate their web-browser to the console, unsolicited.

And, well, you get the point. But maybe you can think of some more?

Ruth Bader Ginsburg courtesy of Kottke.org

Is there a company with a greater rabbit-to-hat ratio than Research in Motion (RIMM)? The Blackberry maker yesterday announced astonishing preliminary third quarter results, including a hefty 49% jump in revenue over last year's third quarter. Moreover, the Ontario-based company says that it addded 875,000 new Blackberry subscribers during the quarter, smashing their - and indeed everyone's - projections.

How do they do it? Ask your friends who've been using a Blackberry for years, and you'll hear little more than curse-laden complaints about the device's clunkiness. Skeptics have long predicted that the Treo and other handheld devices would surpass the Blackberry, and the company has been plagued by patent disputes. Even yesterday's statement noted that RIM "is completing a management-initiated, voluntary review of RIM's historical option granting practices," which sounds like a precursor to someone spending more time with his family. (UPDATE: The New York Times posted a good story on Christmas day concerning the company's reticence on the options question.) After some initial euphoria in after-hours trading Thursday, RIM stock was in the red by midday Friday.

But only the foolhardy would count this company out. Over at Bloggingstocks,
Eric Buscemi attributes RIM's continued success to the fact that "selling a wireless data device is difficult and barriers to entry high". Well...yes. But The Browser thinks the real key here is that RIM managed to do a thing we thought we'd never see: they cracked the foreign market. Europeans and, to a lesser extent, Asians were never as interested in non-phone devices (like pagers) as Americans were; if they want portable e-mail and Web capability, they want 'em on their phones. That, we thought, meant that Blackberrys would never catch on - who wants to carry around two devices?

But RIM was a step ahead of us; not only does The Pearl totally pass as a phone, but beginning in 2004, RIM began licensing its services to phone companies abroad, so you didn't need to own a Blackberry in order to have Blackberry functions. Those steps have paid off handsomely; according to RIM CFO Dennis Kavelman in Thursday's research call, a full 27% of RIM sales now come from outside North America. And so, as much as we still think the stock's ridiculously overpriced, there is still ample room for this company to grow.

The Financial Times has an interesting story about the ongoing bribery and fraud scandal involving the telecommunications group at Siemens AG. Management contends they are victims of unscrupulous employees acting on their own, while lawyers for the suspects say bribes were business-as-usual - and they are trying to show that top officials had knowledge of the affairs.

This feels a lot like the WorldCom scandal of a few years ago. The circumstances are different - there, you'll recall, the CFO cooked the books to keep operating margins artificially high. But what everyone wanted to know was whether then-CEO Bernie Ebbers knew what was going on in his own shop. In the end, a jury was convinced that he did, and he was sentenced to 25 years in prison.

To be sure, Siemens is a multifaceted engineering firm - telecom is just one of the things it does. But the telecom industry, big as it is, is dominated by a handful of global players. If bribes are in fact, business-as-usual, it wouldn't be much of a secret, and shouldn't have been to Siemens management.

Earlier this week, the blogosphere was atwitter after a Gartner report predicted that blogging will slow down next year, citing Technorati stats showing that the number of new blogs created in October was 100,000 a day, compared to 160,000 in June. But InformationWeek called up Technorati for some context and got an interesting answer:

Dave Sifry [CEO of Technorati] said he believed the slowdown detected by Technorati may have been due to a decrease in the number of spam blogs, or splogs, Technorati has been tracking.

Okay, so that's good news for bloggevangelists worried that their flock was thinning. But what of splogs, fake blogs that are created only to generate ad impressions or boost another site's page rank? They're a huge problem. Sifry told the Financial Times in October that "about 90 per cent of new blogs are splogs." Not only are they as annoying as any spam, junking up the web with useless stuff, they cross into the territory of intellectual property theft by reposting other blogs content on pages just to generate traffic. Ask Michelle Leder, author of the journalistically brilliant footnoted.org, who posted on behalf of about a half-dozen business blogs who are the victims of splogging. Or talk to the folks at digg.com.

The main culprit, when the problem first arose a year ago, was Blogger.com's Blogspot, which is owned by Google and feeds the search engine. Google then instituted one of those "please type what you see on the page" things to prevent robo-posting and a "flag" system to spot bogus blogs, and the blogosphere mostly stopped talking about the problem of splogs. But have they gone away? Clearly not.

Google, however, is still on the case, and just issued some guidelines and this tidbit addressing splog victims:

Don't fret too much about sites that scrape (misappropriate and republish) your content. Though annoying, it's highly unlikely that such sites can negatively impact your site's presence in Google. If you do spot a case that's particularly frustrating, you are welcome to file a DMCA request to claim ownership of the content and have us deal with the rogue site.

We'll see if that fixes it.

Rumors swirl that the NBA has demanded YouTube remove video of its most recent brawl-ball exhibition featuring the Knicks and Nuggets. But if you search on YouTube, you'll find some video. Some of it's user-generated (looks like cell phone cams) but one is clearly an ESPN rebroadcast. Yet, given the ubiquity of other viral videos (like this one, a personal fave) that have tons and tons of posted videos on YouTube, the NBA brawl seems to have very few. Plus, links to videos that had been up earlier have been deactivated.

It is possible for YouTube to remove videos that violate copyright laws (like in this case), although it's nearly impossible for an individual or organization simply to bury something they just don't like, according to the Browser's Jia Lynn Yang. It would be nice for YouTube to explain what exactly is going on here, and what the rules are about removed or copyrighted video, and for the NBA to be a bit more transparent so as not to inspire conspiracy-mongering. The Browser has left a message for an NBA spokesperson; we'll update if they get back with an explanation.

Browser contributor Telis Demos has been hammering home this week the important point that TV advertising from the country's biggest marketers continues to dwarf their online spending.

But it's equally important to remember that there are big ad bucks out there that come from smaller advertisers too, and the Web seems to be mopping those up. A market research firm called Borrell Associates is now claiming that in 2006, online ad spending for employee recruitment - a.k.a., help wanted - has for the first time surpassed comparable spending in newspapers. The actual amounts are $5.9 billion on the Web vs. $5.4 billion for newspapers.

We haven't seen the full report, but in a thorough post, Alan Mutter quotes this nugget:

"When the history of Internet advertising is written, recruitment sites will undoubtedly dominate the first chapter," says Borrell. "In 12 years, these sites have grown from a few job boards to hundreds of niche competitors. Online recruitment now accounts for 25% of Internet advertising."

It's definitely a major milestone. Moreover, the report predicts that online recruitment will grow to $10 billion by 2011.

Does this mean you should rush to buy stock in the likes of Monster (MNST)? Not necessarily. The online services have captured market share by undercutting newspapers on ad rates. That's great for advertisers, but it's a vulnerable long-term strategy. After all, as Mutter notes, more and more job seekers are being encouraged to file resumes online directly with prospective employers. Lots of college campuses now offer peer-to-peer classified ads. In other words, there are so many potentially disruptive forces out there that could drive ad rates close enough to zero that no middleman will be able to turn a profit selling classifieds.

A few weeks ago, I posted some out-takes from a candid interview with Bill Watkins, the CEO of hard-drive kingpin Seagate Technology (STX). The column generated a slew of positive feedback from readers who called Watkins a true leader and vowed to buy Seagate drives exclusively from now on. Valleywag even deemed Watkins a hero for his refreshing candor. But the reaction inside Seagate was much different. Apparently, the company's Minneapolis office in particular was up in arms over Watkins' lack of restraint when talking with the media. So much so that Watkins chose to address the troops in a memo that has been obtained by The Browser. Here it is in its entirety:

From time to time, we gather our senior leadership team with the journalists who regularly cover this company and the sector as a means of maintaining positive relationships with the media. Most recently, we gathered a group of bloggers in a San Francisco restaurant where I explained to many of them what I believe to be the drivers of growth of the storage industry. In the course of one particular conversation with a Fortune Magazine blogger, in which we discussed a number of topics including sports, business and politics, I also explained how the proliferation of digital content and e-commerce were benefiting the storage business. In illustrating both the positive and negative impacts that the Internet and "we" as technology companies have on the world, unfortunately, and unwisely, I also used pornography as an example to illustrate a point. Fortune Magazine chose to focus narrowly on this example in their headline. I did not state this as our "mission." They are in the news business and eager to get their reader's attention and I should have known better. Even though I believe Fortune's headline writers took my comments out of context, I want you to know that I am sorry if this has in any way offended anyone. Clearly, I value everyone who works at Seagate and the culture we have built together.

Bill

It doesn't sound like the Watkins I had dinner with, but the letter's authenticity has been confirmed by Seagate officials. Frankly, I don't think Watkins had anything to apologize for. Just goes to show how tough it is to be a CEO and an actual human at the same time.

It's been hours since we've posted about Google, so let me rectify that with this very interesting little item: Rick Skrenta of skrentablog, long skeptical of the analyst consensus that Google (GOOG) owns a 40% market share in search, uses HitWise to tabulate what percentage of inbound traffic a few major sites - apple.com, craigslist.org, flickr.com, nytimes.com - get from google.com. He finds it averages out to about 70%. That's much more in line with what most of us experience everyday.

Skrenta thinks this is a more relevant measure of market share than page views on Google's search page, which is how it's currently measured by Nielsen's comScore. After all, the point of a search engine is to find something and leave, not to just keep searching. And it's the linking to other sites, not the page views, where searches generate the vast majority of their revenue. So let's agree and say Google's real market share is 70%. Wow, that's a lot.

Yet more good news for the Goog, right? Well, perhaps not. Henry Blodget, writing over at Seeking Alpha, argues that such a huge market share only hastens the day when Google can no longer grow its search engine. That will ultimately become materially relevant to its projections -- and slam the stock.

You also have to consider the effect this has on Google internally. If google.com eventually becomes the only search in town (skrenta and his commenters don't think 99%+ marketshare is out of the question), that division will have the highest returns of any of Google's businesses by virtue of its monopoly.

Will that cause the company's best thinkers get stuck working on it? After all, in times when earnings pressure is higher, the temptation will be to wring a bit more from the golden goose. Techdirt points out the obvious problem with that: You neglect the future. They say Google is already misdirecting its development energy by passing up opportunities to become a platform, not just a destination, for Web 2.0.

There's also the risk that Yahoo (YHOO) and Microsoft (MSFT) might someday feel like they've been beaten soundly in search and retreat, freeing up money and time to shoot for the next big thing. Mightn't Google prefer to bog their rivals down in a land war they can't win, preventing them from beating them to the next frontier?

Oh, and don't forget the Feds, either. Seventy-percent market share is kind of magic number.

One of the symptoms of the Web 1.0 bubble was the pile-on of celebrities into the online scrum. Sure, famous people can help build audiences, but the greed-fueled rush of the late '90s that sucked people like Steven Spielberg and Dr. Koop into what would become disastrous ventures was, especially in retrospect, a sign of a market top. (Incidentally, you can apparently purchase a stock certificate for Drkoop.com, from the days before the company behind it was delisted from NASDAQ, here.)

And so when The Browser heard this morning about a $20 million investment round from the likes of Kate Spade and Jimmy Buffett and former Miami Dolphin linebacker Nick Buoniconti in a targeted new media project, a little warning bell went off on our computer.

But here's the interesting part: it's not primarily a Web venture - it's television with a Web play. Since 2004, a small consortium of TV stations called PlumTV has been operating in some of America's most exclusive communities, such as Martha's Vineyard, East Hampton, Vail, Aspen, and Telluride. The idea behind Plum - which was founded by Tom Scott, one of the cofounders of Nantucket Nectars - is to target the jet setters while they are in their vacation homes.

Does this make business sense? After all, TV production is notoriously expensive, and the audience Plum is going after is pretty small. But Plum president Chris Glowacki made a fairly persuasive argument in an interview with The Browser. First of all, he claims that "a seismic change" in technology has dramatically lowered the cost of TV production, and that "We operate in places of such natural beauty, and where there are such interesting things happening, that the content comes to us."

Secondly, he argues that Plum represents the most efficient way of reaching the super-rich, because it is "geotargeting," rather than going through traditional, more scattershot TV marketing. "It's been difficult to target the wealthy on TV," Glowacki said, "because in some ways the rich are just like everyone else. They watch what's on." Now, he says, advertisers have a way to specifically hit the affluent masses - and their wallets - where they live. And finally, by distributing some of Plum's content on the Web, the company opens up a whole new way to reach an audience outside its television markets, and leverage the booming online video ad market.

The Browser has never seen Plum (the batteries in the TV remote at our Aspen mansion have run down). But certainly the notion of putting celebrity interviews and parties in glamorous places online, and charging advertisers a premium for it, is very much in harmony with what a lot of targeted Web-ad firms are advising these days. If they're right, then Plum may be right, too.

Fred Wilson is a sharp and seasoned fellow, and The Browser would think twice, even three times, before publicly disagreeing with him. And there was much about his recent discussion of the coming deportalization of the Web that made us nod our heads. Wilson's argument is a variation on the long-tail thesis; i.e., that the future of the Web will emphasize tons of little sites rather than a few huge ones.

Still, there were two places in the text where we stumbled. One is generic: woe to him who predicts the downfall of portals. Trust us; we've been there. (More than once, actually, though thankfully some links don't survive.) The fact is that the really big, multifunction sites on the Web like Yahoo, MSN.com and aol.com have, overall, proven themselves very resourceful in adapting to users' needs. (And to his credit, Wilson followed up his initial remarks, saying that "deportalization" was a poor way of describing what he was talking about, since he doesn't think portals are going away anytime soon.)

The other hiccup was this:

I don't have the data to prove it, but my guess is if you looked at the percent of all pageviews that are generated each month, a much smaller portion exist on the top 10 properties today than in 2000, at the height of the first Internet era.

This just didn't strike us as right. And, helpfully, Read/WriteWeb commissioned some statistics from the Web analytic firm Compete that confirm what we suspected. According to their numbers, the top ten domains account for 40% of Web page views in 2006, up from 31% in 2001.

Of course, just because there are statistics doesn't mean the argument is settled. One commentor on Read/WriteWeb dismissed page views as a yardstick, noting: "1) Using GMail generates 1 pageview no matter how many messages I read and write; 2) Using MySpace generates a pageview if I sneeze."

And that raises another point of contention: while MySpace and Facebook, neither of which existed in 2001, are in Compete's top ten domains today, does it make sense to call them portals? Not to the long-tail devotees, who argue that the social networking sites represent content at its most micro level.

We disagree. If MySpace users are spending tons of time on that site to contact friends, find music, and read news and opinion, that's essentially what people were doing on portals in 2001. What would be really helpful in this debate would be some more robust definitions. Keith Teare from Edgeio likes a mountain vs. foothills analogy, which is nice, but his argument that the foothills will overtake the mountains strikes us as geologically dubious; plus he clutters his ten-point list with a bunch of jargon that seems more like advocacy than analysis.

What's your view? Should MySpace and Facebook be thought of in the same category as Yahoo and MSN.com?

Bill Nguyen's not the kind of guy you'd peg for self-loathing. The serial entrepreneur is like a brilliant four-year-old on a sugar high: perpetually on the edge of his seat and not above bouncing up and down when someone else has been talking for more than 10 seconds. If that's not a good enough description, let's just leave it at this: He's a huge fan of Jersey feelgood band Fountains of Wayne. (Anyone out there remember Stacy's Mom?)

Which is why it was so surprising to hear Nguyen reflect on his personal history and the state of innovation in the Valley. Nguyen came by my San Francisco office yesterday to talk about his latest startup, the CD-sharing site LaLa. Part Netflix, part Web 2.0, part used record store, LaLa has been on a tear. Two hundred thousand users have offered up more than 5 million CDs for trade at a cost of $1 each plus 75 cents handling. It's one more example of the rash of brilliant discovery sites cropping up on the Web lately and Nguyen is obviously excited about the idea. But it's not the best idea he's had. That honor, he says, would have to go to his first startup, unified messaging company Onebox, which he sold for $850 million in 2000. "Here's what I think about the whole serial entrepreneur thing: Every time I do something, I suck a little bit more," Nguyen says. "Experience teaches you to be less bold, more concerned. All these life experiences teach you to be afraid. I have to try so much harder now not to be the sum total of my experiences."

Nguyen overcomes his own tendency to think about droll topics like business models and return on investment by surrounding himself with naive twentysomethings. "We hire a bunch of young kids and let them do whatever the hell they want." Needless to say, Nguyen is baffled by the tendency of venture capitalists to seek out second and third-time entrepreneurs, thinking that they're less likely to repeat mistakes. (LaLa has raised $9 million from Bain Capital.)

As we were talking, I thought about a piece I edited at Wired by Dan Pink about a University of Chicago economist who has devised a universal theory of creativity. In a nutshell, the economist claims there are two kinds of innovators: conceptualists and the experimentalists. Conceptualists make their mark early in life and never reach that peak again (think: F. Scott Fitzgerald, Orson Welles, Bill Gates?). Experimentalists toil away their entire careers and peak much later in life (Mark Twain, Alfred Hitchcock, Steve Jobs?). Nguyen, who studied economics, doesn't see it that way. He thinks world-changing companies just don't come from the minds of thirty and fortysomethings. But I think he's being hard on himself -- and his peers. I think experience has a lot going for it -- and as long as that wisened thirtysomething knows enough to hire a bunch of brash kids, the combination can be pretty incredible. But maybe that's just because I'm fast-leaving my mid-thirties.

What do you think? Should Silicon Valley have an age limit? Do second-time entrepreneurs suck?

Reuters is reporting that Juniper shares are falling on news that Ericsson is buying Juniper rival Redback Networks for $2.1 billion. Juniper's products had been distributed by Ericsson, which has strong relationships with phone operators worldwide.

But I just got off the phone with Bjorn Olsson, Ericsson's executive vice president and general manager, networks, who said Ericsson plans to continue to work with Juniper in two product areas: Juniper's high-capacity core router, and technology related to so-called GPRS gateways.

"Those are the two basic areas where we work with Juniper," Olsson said. He didn't, however, indicate that the relationship would go much beyond those two areas.

It's so easy to be swept away by the seductive embrace of Web 2.0 tools. The Browser got all excited this month reading about the launch of Betocracy, a Blogger-like tool that makes it relatively easy for any Web user to set up a prediction market, that is, a speculative market in which participants make bets about the outcome of events (in the case of Betocracy, not with real money). The potential applications for that are huge, and the collective data that could be harnessed might teach us a lot about market behavior in non-monetary situations.

Such markets are not new: the University of Iowa business school has been running a real-money political futures market since the 1988 presidential contest. The market's method is that a user purchases a futures contract that, say, a given Democrat or Republican will win a race, for whatever price the market will bear; it's redeemable for $1 if the correct choice is made. The price of the contract thus represents what the market as a whole believes the outcome will be; if the price is 50 cents, it's a dead heat, 0r so the crowd believes.

If that sounds a lot like gambling, well, it is. From a regulatory point of view, the Iowa market appears to be an academic exception to the general U.S. prohibition against betting on politics; in Britain and elsewhere, lots of people use the peer-to-peer gambling site Betfair to place bets on all sorts of things, including political contests, interest rate movements, or the closing price of the FTSE 100. (The legality of U.S. residents using such sites is very much up in the air.)

Aside from the tempting prospect of making money, these markets also theoretically aggregate information that is useful for making predictions. And that's why what IS new and potentially exciting about Betocracy is that it allows pretty much anyone to set up a market like this on any subject they want.

Here's the thing, though: the actual predictive power of these markets is very much in dispute. Anyone who followed the November elections closely on these markets will recall that even up until Election Day they showed a strong market prediction that the Republicans would retain the Senate. Now, the hardcore advocates will tell you that this does not represent a failure of the system, that it's a question of probabilities, that market participants had insufficient information, that the method still has greater predictive value than a poll, etc. Adjudicating that debate is well beyond the Browser's ken, but using a common-sense definition of "prediction," it certainly looked like the markets had a pretty lousy election (especially for the majority who lost money!).

But even the most passionate defenders of predictive markets argue that they will only work when there are a sufficient number of traders to make the market liquid. And that's where, we fear, Betocracy is severely limited. Granted, the site's been up for only a couple of weeks. But it should be obvious that people who set up a predictive market about who is going to come in second place in a charity 5k run are doing nothing more than amusing themselves. Even more serious-sounding markets, such as whether Barack Obama becomes the Democratic presidential nominee in 2008, are utterly meaningless if no or few people participate in them. The Browser can't help but feel that the wisdom-of-crowds meme is fueling a lot of experimentation with questionable payoff.

A blogger named Rogers Cadenhead has recently gone public with the fact that the movie studio MGM has filed a dispute against him concerning the domain name wargames.com. Cadenhead says he has owned the name since 1998, and began operating an online video game shop there this year. The suit stems from the fact that, as he puts it, MGM "produced the 1983 movie WarGames and registered it as a trademark". He also notes that the studio is producing a sequel scheduled for release next year.

Over at Techdirt, they're pretty pessimistic about the little guy's chances: "Given the history of the domain name arbitration game, where the big company almost always wins, the deck is stacked against Cadenhead".

But wait! The Browser is not an attorney, and does not play one on television. But we noticed something curious about MGM's trademark of the term. Although the movie came out in 1983, MGM did not bother applying for a trademark until 2001 - three years after Cadenhead got the domain. If Cadenhead can prove he acted in good faith, that might be enough of a loophole to let him slay the MGM lion.

To follow up on Jeff O'Brien's post last week about the challenges VCs are facing, particularly with cashing out of their investments: Yesterday, the National Venture Capital Associations published results from their first-ever survey of 200 venture capitalists, in which they asked the VCs what they think will happen in 2007. Seeing as the IPO market continues to be seriously ho-hum (and only half the respondents think it will improve next year), it's no surprise that VCs are looking at alternative exit strategies more carefully. For one, they can take their IPOs overseas to foreign exchanges. For another, there's growing chatter about seeking private equity buyouts.

[NVCA President Mark] Heesen says VC firms are doing a brisk business selling companies to private equity firms — a relatively new VC trend. Fundraising by private equity firms has exploded in recent years. In the NVCA survey, 71% of VCs say sales to private equity firms will be a bigger option in 2007.

So it's all aboard the private equity bandwagon. If this is the strategy, the VCs had better hope that there's more than dotcom era-like froth behind the current private equity boom.

Google has plenty to learn from eBay's experience in China, but also, says the International Herald Tribune, has its own troubles in Sergey Brin's homeland, Russia.

... Google opened its first sales office there only a year ago, giving rivals a head start. But the company's development has also been slowed by cultural and linguistic issues, company executives acknowledge. Analysts say Google's experience in Russia shows that even this most polyglot of companies can sometimes get itself lost in translation, leaving room for local rivals to fill the gaps. ...

While Google is the most popular Web site, and by far the most popular search service, in many Western European countries, it barely breaks into the top 10 in Russia. According to ComScore Networks, which tracks Internet traffic, 28 percent of Russian Internet surfers using home or office computers visited Google sites in October, making Google the eighth-biggest Internet brand.

In response to the Digg item this morning, a plugged-in friend who runs this spirited, sometimes goofy blog writes:

I think the social networking sites will face a day of reckoning in the not too distant future when it becomes obvious that their users do not respond to the ads. A Jupiter analyst told me a few months ago that MySpace had some of the cheapest/least desirable real estate on the Web.

Investors take note.

An interesting meditation from Salon's very cool Andrew Leonard on e-microfinance website Kiva.org. As Leonard aptly analogizes, it's like online dating meets investment banking for the poor: You choose someone from a long list of profiles, ranging from widows in Togo to small businessmen in Ecuador, to give a tiny loan to.

Leonard draws out a beautiful, and revolutionary, picture of women in Bangaldesh trouping to the Internet cafe to tweak their profiles to best attract some California yuppie who frequents the site. But he's bothered by the fact that only the most interesting (or datable) poor might get his money. It's true that one of the benefits of capitalism is that you don't have to like the person who bakes your bread, just the bread itself.

But it's also true that salesmanship (the baker with the slickest marketing campaign, say, or the most beautiful shop) gets rewarded. So is it so terrible that the savviest poor might get a few extra dollars? Perhaps not -- so long as the un-savvy are also getting help. That's the real point of all this, isn't it?

"It's so crowded, nobody goes there anymore." The paradox is attributed to Yogi Berra, and despite its naked illogic you know exactly what he meant.

The Browser braintrust has been thinking about that quote for a few weeks, since reports began to surface that traffic at social networking sites like MySpace and Facebook is beginning to trail off. Why should that be?

It's well-known that users of sites like these can be as fickle as the teenagers that many of them are; just ask the good people behind erstwhile category leader Friendster. The hard question is: why does a site go from hot to not?

In Friendster's case, as Gary Rivlin masterfully documented a couple of months ago, the site had slow-loading pages and failed to move quickly enough into the music space that made MySpace a hit.

But it's also a possibility that scale alone can take the community out of community sites. That is, at a certain number of members and active participants, a community Web site qualitatively changes into something different than its original organizing principle.

So for example: based on number of digs, the most important stories to Digg members are consistently stories about technology, and fairly geeky technology at that. A desire to know about technology news and opinion clearly motivates people to visit Digg.com and to register their opinions. However, the overwhelming tech focus is also a function of scale; Linux stories, for example, perform well on Digg because Linux programmers and devotees are greatly overrepresented on Digg.com. As the user population of Digg.com increases and begins, statistically speaking, to more closely represent the population as a whole presumably the proportion of Linux-related stories among the "most Dugg" will fall.

We got a sense of this this week, when Digg started ranking videos according to user preference; the list is profoundly different from the list of Dugg stories, and is relatively tech-free. Maybe that indicates nothing more than the fact that what makes a good video is different from what makes a good Web story, but it got us thinking. If the entire American population were active Digg members, the most Dugg stories would presumably begin to look a lot more like the home page of CNN.com, or the "most e-mailed" page on Yahoo! News - no Linux there!

The question is: would that represent a success or a failure for Digg? On the one hand, as a real-time snapshot of the "wisdom" of the American crowd, it represents a triumph, a kind of democratic media mirror. On the other hand, it's a tower of Babel, a high-tech tautology that says little more than "People are interested in what people are interested in" (and we're back to Yogi Berra).

The ultimate significance of Digg, then, has arguably not been its heralded voting mechanism, but rather its ability to keep community defined at a particular size and relevance. Which means that the imperative of Web 2.0 companies to get as big as possible as fast as possible may in fact be a mistake.

Not to say that there is a fundamental flaw in the wisdom of crowds thesis per se. But as The Browser's friend Ben Schott once eloquently put it, "Anyone who's ever actually been in a crowd knows that it isn't wise". That's not quite right, but what does make sense is that the crowd's wisdom is a function of its size and the people who constitute it.

It's official. eBay is shutting its China site. The Browser feels a little humiliated on Meg Whitman's behalf. Her famous summer sojourn to Shanghai in 2005 attracted some mockery from rival Jack Ma. eBay had been rebuffed in Japan a few years ago, so in China it was plying Chinese consumers with free hours of karaoke in exchange for joining eBay. So much for an Asian invasion.

So what went wrong? For one thing, eBay's rival in China, taobao.com, was free from the start. eBay eventually dropped its transaction fees too, this past January, but that was a case of too little too late. At the root, though, was eBay's failure to grasp the Chinese consumer's buying habits. From an article last May in the San Francisco Chronicle:

Dai said she switched to Taobao after eBay acquired EachNet and redesigned the Web site to conform to its global format.

"At first, EachNet was really convenient, but after it changed its layout, it was a mess. I didn't know how to use it anymore," she said. She has remained on Taobao ever since, mainly because of its free service.

But Dai also prefers Taobao because it allows her to call, e-mail or chat with other users before a product is purchased.

EBay permits users to leave messages for each other on its site, but conceals personal contact information until a buyer wins the bid. This ensures that users carry out transactions on the site, rather than directly between buyer and seller, explained Liu Wei, public relations manager at eBay EachNet.

Global formats? Preventing users from building the kind of community they want? Google should be watching eBay's slip-up very closely as it takes on the Chinese homegrown search site Baidu. When Baidu's CFO Shawn Wang was at Fortune's offices earlier this year, he explained that the most popular feature on the site [aside from searching for mp3's] was the user message boards.

Google doesn't have an equivalent draw in China, and that's probably giving users one big reason not to use it. Perhaps that explains these numbers from a Bloomberg article: "Beijing-based Baidu.com Inc. may raise its share of the Chinese search market to 56 percent next year, more than double Google's 19 percent, according to a Sept. 28 Credit Suisse Group report."

Our favorite Scandinavian web entrepreneur-outlaws strike again. In an interview with the Financial Times, Janus Friis and Niklas Zennstrom, the boys who first gave us Kazaa and then Skype, have confirmed lingering rumors that they will launch an Internet-based TV service. The initiative, thus far codenamed the Venice Project, "is expected to launch next year and is being tested by about 6,000 individuals," reports the FT.

And here's the reassuring news for mainstream TV networks: The new IPTV service is designed for legitimate copyrighted content. As Ryan Block at Engadget notes: "Their video data is encrypted so the P2P here isn't the same kind of P2P you might be thinking of."

For those of us without a conventional TV waiting patiently for the arrival of real IPTV, each little step in this direction is welcome news. And we're a growing number, no?

There are days when The Browser wonders what the heck they are smoking over at Bloomberg. Take, for example, the report that while Facebook isn't for sale, one of its board members, Peter Thiel, says that the two-year-old social networking site's "college-aged users make it worth $8 billion or more, as much as Viacom Inc.'s MTV music video channel."

We know that the rules of reporting for a wire service say that when a prominent company insider says something substantive, you've got to report it as news. And Thiel is, admittedly, a pretty interesting guy; in addition to his tech and political interests, he was also the co-producer of the movie Thank You for Smoking.

But isn't there any journalistic obligation to put the $8 billion number in some kind of context? The notion that Facebook, with its 11.6 million users, is worth as much as MTV is ludicrous. Viacom (VIA), which owns MTV, does not break out revenues for its individual cable networks, but all of Viacom's cable networks brought in more than $6.7 billion in revenues in 2005, and a hefty $2.6 billion in operating income. It's a reasonable assumption that MTV represents at least half of that, and so if Thiel's $8 billion figure is at all accurate, you're talking about a multiple for MTV something like 6-8 times operating income, which is about standard in the media industry.


At times, Facebook's founders have claimed that the site turns a profit. But even if it does, the total revenues for the company could not be higher than eight digits. After all, Bloomberg's own figures indicate that total advertising spending on all social media sites is $350 million - a fraction of MTV's revenues. The Browser understands that we are living through a Web 2.0 bubble, but that doesn't mean that credible news outlets like Bloomberg need to blow smoke into it.

Another word about our old friend, the television: Here's a very cool new chart from AdWeek. The world's biggest spenders on advertising -- Procter & Gamble, GM, AT&T, etc. -- spent $7.2 billion on television ads in 2006. Versus $664 million on the web. The biggest TV spender, P&G, sees fit to shell out just 2% of its $2.4 billion total budget for "New Media" ads.

Maybe these slow-moving megacaps are a lagging indicator of where media is trending, but if you're inclined to read dollars as a truer than words (and they all do have great things to say about New Media), TV is still king by a longshot.

Last week, we were skeptical of a Bloomberg story about a Forrester Research report claiming that iTunes sales had tanked 65%. It looks like The Browser was sniffing the right tree. From the New York Post last Friday, the author of the Forrester report says Bloomberg got it wrong:

On his blog, [Forrester Research analyst Josh] Bernoff defended his "simple little report" by saying certain media outlets highlighted only one of his findings - that sales were plummeting.

"Our credit card transaction data shows a real drop between the January post-holiday peak and the rest of the year, but with the number of transactions we counted it's simply not possible to draw this conclusion . . . as we pointed out in the report," he wrote.

Basically, what Bernoff is saying here is that his numbers suggest that the number of iTunes transactions -- that means purchases, not individual tracks -- was levelling off, indicating that there were simply fewer customers, not fewer tracks sold. Or as he put it in the original report, "Few iPod Owners Are Big iTunes Buyers". He did not make a statement about iTunes' overall sales. Those who did estimate overall iTunes sales figures, as the Post story notes, found good news for Apple. comScore estimates iTunes sales revenue is up 84% through the first nine months of 2006. Nielsen says all digital music sales of individual tracks are up 67% through November. Meanwhile, on his blog, Bernoff has a bit more to say and some scary anecdotes about how fast a bit of bad news travels.

Breathe deeply gadget pundits: Even as the hype around the would be Apple iPhone hits fever pitch, Google has dropped a telephonic g-bomb. David Smith at The Observer reported yesterday that Google has been in talks with European cellular biggie Orange regarding the creation of a Google-powered cell phone. Writes Smith:

Executives from Orange flew to Silicon Valley in California for a meeting at Google's headquarters, or 'Googleplex', to hold preliminary discussions about a joint deal. Their plans centre on a branded Google phone, which would probably also carry Orange's logo. The device would not be revolutionary: manufactured by HTC, a Taiwanese firm specialising in smart phones and Personal Data Assistants (PDAs), it might have a screen similar to a video iPod. But it would have built-in Google software which would dramatically improve on the slow and cumbersome experience of surfing the web from a mobile handset.

If true, this is clearly biggish news, signaling a new direction for Google. Both Google and Orange refused to talk to Smith for the story, and the blogs seem split on whether to buy the report. "Somehow, I am a bit skeptical on this one," writes Rafat Ali. But Om Malik is more generous: "Google Phone, if you think about it is a reasonable speculation," he writes. "Google has been aggressive in developing location based services, has amped up its local search and mapping services. In addition, it has also been mobilizing its applications such as GTalk and GMail. YouTube, the video arm of Google, is beginning to embrace the mobile ecosystem."

OK, we say if it's not happening now, it's likely to soon. But the thing that catches our attention in all this is the very plausible notion that Google would leave the hardware to someone else. Sounds a lot like, um, Microsoft, no? And what's the likelihood, we wonder, that this HTC outfit will put together the sort of slick integrated phone that we all crave? With Google ascendant, are we all in for another era of hokey, generic hardware married to proprietary software?

For now, we're still holding out for the iPhone.

Today's New York Times has a round-up of findings from this year's U.S. Census Statistical Abstract, including this shocking tidbit:

Adolescents and adults now spend, on average, more than 64 days a year watching television, 41 days listening to the radio and a little over a week using the Internet. Among adults, 97 million Internet users sought news online last year, 92 million bought a product, 91 million made a travel reservation, 16 million used a social or professional networking site and 13 million created a blog.

Could it really be that Americans use the Internet only a fraction -- about one-tenth -- of the time that they watch television? I think most blog readers would find that kind of bizarre, and probably distribute their time inversely. And clearly this stat doesn't count time at work, where pretty much the entire day for some workers could be counted as "time on the Internet." Or am I overestimating the number of people who sit in front of a computer for work?

For online marketers or Web businesses, these stats might be a good thing: There's plenty of room to grow! After all, 27% of Americans don't even have the Web at home yet. (The time someone spends online also increases once they get broadband.)

But much as I love the Internet, these figures make me wonder: Perhaps there is a limit to how much online leisure time Americans can stomach. Is TV just easier to zone out to during free time? That could be good news for Old Media, at least until the Internet becomes more TV-like. In any case, since you have to buy the Statistical Abstract, I can't read it to get any more more context. (And I can't reach their media relations).

Maybe a reader with a copy can shed some light on this pretty surprising finding.

[UPDATE: A commenter points out that the Abstract is available free here. Haven't had time to review it in depth yet, but just flipping through it, it's full of little snapshots of American life. For example: 7% of Americans read a blog last year. That's more than attended a classical music performance (2.4%) but fewer than played billiards (9%). A challenge to commenters: Come up with the most interesting/funny/illuminating statistical contrast.]

South Korea is a telecom wonderland. People there have true broadband, not this 256 kilobit/second stuff that passes for high-speed Internet here in the U.S. And wireless service is ubiquitous and inventive. Social networking was invented there, by a phone company, no less. Now comes word out of Seoul that the government is looking at ways to limit teens' cellphone use.

The measure is aimed at keeping the kids from spending too much money on cell-phone bills. Ballooning bills are a big problem there; a teenaged boy killed himself in February after racking up a 3.7 million won ($4,017) bill.

But I wonder if South Korean parents -- who are sticklers for education -- are getting concerned about the amount of cell-phone time their kids are logging at school. The Reuters article notes that 4 out of 10 South Korean kids use their phones at school, but that number seems low. Think about it: Would you tell the ominous-sounding Korea Agency for Digital Opportunity and Promotion if you were using your cellphone in class?

GigaOM has a post about a big WiMax deployment in India. WiMax, a wireless standard that's much like WiFi, but delivers broadband across much greater distances, is being hotly debated here in the U.S. Proponents, including Intel, contend it can be affordably deployed as a mobile technology, while doubters, especially Qualcomm, say it isn't clear whether WiMax will scale to meet the rigors of mobile users.

But the GigaOM post is a reminder that WiMAX's real benefit, today at least, isn't as a substitute for 3G in the U.S., but as a much-needed fixed broadband technology in emerging telecom markets such as India.

Note to anyone carrying a laptop around with several hundred thousand of your colleagues' social security numbers: Don't leave it in your car.

Boeing has sheepishly admitted that a company laptop loaded up with personal information on 382,000 current and former employees went missing from its owner's car in the first week of December. Happy Holidays comrades! To make matters worse, the Seattle Post Intelligencer notes that this is the fourth incidence of a laptop laden with personal employee information disappearing at the aerospace giant this year. Doh!

Not that they're alone. Remember the HP-Fidelity fiasco last March? The good news is that no misuse of the stolen identity information has yet been reported. Still, The Browser hates to be reminded of the inevitability of human error, particularly by the people who make important things like wings and landing gear.

I had a chat with Benchmark Capital general partner Bill Gurley this week about his investments, the Valley, and the state of innovation, et cetera. Gurley's a great person to check in with now and again because he often sees things that others don't. A former analyst and engineer, he has a way of sizing things up that makes him both intriguing and highly quotable. But on this day, when I asked him to talk about the state of the VC industry, he turned dour. "There's too much private equity out there. It concerns me that when you over-capitalize entrepreneurs, they tend to make worse companies. They're trying to beat each other and use the capital to do that. And 70 percent of venture investors have been VCs for less than two years. We've all seen how this movie ends. "

The first time you hear this kind of talk from a VC, it sounds rather shocking -- someone in business is actually being honest about the prospects of his business. Then you realize this is what VCs do. Maybe it's a ploy to try to get more for their money or weed out weak competitors, or maybe it's just plain bitching. But it seems nearly impossible to get even the best VCs to say anything positive about the profession that has awarded them with Ferraris and private planes.

Having said that, Gurley's right, as usual. It's clear that the VC model is going through upheaval. There's an incredible fever of entrepreneurism in the Valley these days, but it takes less money to start a company, so entrepreneurs need less of it. This not only raises the prospects for angels, it opens a clearer path to profitability, which means VCs face challenges from both ends (short-term profitability is not generally a good thing for the VC model). First, they have to compete with the little guys for investments. George Zachary told me on December 2 that he was meeting 5-10 companies every day until Christmas, logging 16-hour days, seven days a week, trying to land the best investments in the consumer Internet space. But then what? Zachary can only sit on so many boards. And how does he cash out of his investments with little hope of an IPO? A $10 million Google aquisition doesn't mean much to a VC.

Paul Saffo told the San Francisco Chronicle this morning that, "We will see more changes to the venture capital model in the next five years than we have seen in the last 25."

Saffo's not one for under-statement, but in this case, I think he's being conservative. The venture capital model has been stagnant for at least that long, and the change that's happening now is dramatic. Gurley thinks we've seen how this movie ends, but I'm expecting a plot twist this time around. Last time, it ended with carnage in the public markets. This time the carnage will be more contained.

VCs have always looked for creative destruction. Now creative destruction is finding them.

This morning's early trading has Apple (AAPL) stock recovering most of the loss it took yesterday after reports that iTunes sales had dropped precipitously. This correction makes sense, for two reasons. One, the Forrester report indicating that iTunes sales dropped by a scary-sounding 65 percent was not quite as gloomy as it seemed. The ratio of iTunes sales to iPod sales has never been especially high, and if you read the fine print of the report, it actually indicates that the ratio is up slightly, to an average of 22 songs per iPod sold.

But secondly, and much more importantly, Apple doesn't need to sell iTunes to make money - and it never has. Back in 2003, Steve Jobs admitted in a Time magazine interview that "the dirty little secret of all this is there's no way to make money" selling music online. As Time's (now Business 2.0's) Chris Taylor put it: "For every 99 cents Apple gets from your credit card, 65 cents goes straight to the music label. Another quarter or so gets eaten up by distribution costs. At most, Jobs is left with a dime per track, so even $500 million in annual sales would add up to a paltry $50 million profit. Why even bother? 'Because we're selling iPods,' Jobs says, grinning."

Real investors will keep the focus on the important number: Apple has sold 67.4 million iPods and counting. The Apple music strategy is akin to the classic razor business model: sell people the blades, and you can give the handles away.

Bloomberg - along with just about everyone else - is off and running today with a just-released Forrester report that says that iTunes sales were off 65% in the first six months of 2006. "The decline is a reversal after almost two years of increases from April 2004 through January 2006," reports Bloomberg. "Between January and June of this year, iTunes transactions declined 58 percent, while transaction size fell 17 percent."

But surely if iTunes sales are off, the difference is being made up elsewhere, like in hardcopy sales. Nope. Instead, "there's simply been a general decrease across the board in the whole 'music buying scene,'" writes Darren Murph at Engadget. According to Murph, the only glimmer of hope comes from the previously un-chic world of streaming music services. Think Real Rhapsody. "Interestingly, analysts are theorizing that the DRM-era may actually be winding down in favor of 'blanket licensing,' which was cast aside just years ago in favor of the 'per purchase' approach."

OK, The Browser is stumped. We're not surprised to hear that iTunes sales are slowing. Once the thrill of instant gratification wore off, we went right back to buying CDs the old fashioned way. Why download an album when, for more or less the same price, you can get DRM-free songs plus a nifty CD with liner notes from Amazon? And sure, we've been having a blast today listening to Pandora, but that only prompts us to buy more new CDs. What are we missing? Speak up you Rhapsody lovers.

[Update Tuesday 6:27PM - Bloomberg has amended its story to include a response from Apple: "iTunes spokesman Tom Neumayr said the report is 'simply incorrect.'" OK, we're the first to be skeptical of Forrester, but usually we take issue when they wax overly optimistic. Moreover, it's hard to sympathize with Apple when it is unwilling to break out its iTunes revenues. We'll keep on an eye on it....]

Hoping to promote the latest version of its SiteAdvisor software, McAfee today issued results from a study on the relative riskiness of search engine search results pages. By riskiness, the McAfee people mean the likelihood that a link from, say, a Google results page, will lead an unsuspecting rube to a dark and dangerous back alley of spammers, pornographers, and possibly KGB agents. (More on that below.)

The upshot? McAfee says 4.4% of all search engine results are highly risky, a number that doubles if you happen to be doing "adult" searches. (Shocker!) Hey it's no picnic out there, but let's just say browsing the web is still a lot less risky than doing crystal meth. Here's the news you can use, though: 41.0% of links deemed risky are so categorized because they lead to webpages built by spammers trolling for your email address.

Listen up kids: Don't give your email address to strangers.

The real juice, however, is in a separate report that McAfee released Friday which suggests that organized crime, hoping to go cyber, has taken its recruiting efforts to college campuses. Writes ZDNet UK: "The report...'Organised Crime and the Internet', alleges that organised criminal gangs are employing tactics used by intelligence services, such as the former KGB, to groom skilled young IT enthusiasts into joining illegal networks."

Perhaps, but beware the tendency towards generalization and stereotype, as in the following money quote from McAfee "security analyst" Greg Day: "Places like India and Russia produce a lot of IT students. These places where there are poorer economies lend themselves to this kind of career. Organised criminals are sponsoring the IT education of some students."

Of course, when selling anti-virus software, it's always helpful to conjure the image of three billion malicious Asian IT students. So, good on the ZDNet guys for not swallowing this alarmist line whole: "When pushed," they write, "McAfee's Day could not come up with any specific evidence of incidents of IT students being groomed by gangs."

So while it's always smart to be prudent, there's no need to lose sleep over dangerous search engine results or KGB-trained hacker freshman just yet.

What? Microsoft -- the company which subjected the world to its unforgivable dinosaur ad campaign -- is drawing raves from the art house set for its most recent Zune TV campaign. Crazy but true: in the ongoing battle for the hearts and minds of the iPod genaration, Microsoft has scored a victory for its Zune by way of a whimsical, Edward Gorey-esqe animation backed by upbeat indie rocker M. Ward. Check it:



So what if the actual product-related message is easily missed says blogger Dr. Macenstein: "Sure, the visuals will likely scare the crap out of young children, and you have to already have heard of the Zune and be familiar with its song sharing abilities to even understand it, but it is a visual tour de force that I think one ups Apple's energetic neon nano ads."

On Digg, the criticisms are more technical. The ads' file sharing metaphor -- in which a small childlike creature gives away bits of an inexhaustible chocolate chip cookie -- fails to capture the reality of Digital Rights Management restrictions complain some Diggers: "If the ad was honest, the girl would only be able to give the cookie 3 times, and as the people walked down the street their cookie would disappear," writes one.

But DRM subtleties aside, the fact is Microsoft is tearing up the YouTube charts. And, funnily enough, Redmond's hit comes just as the normally pitch-perfect Apple marketers have been off key with their ubiquitous iMac ads.

The Browser says: Early Zune sales may be sluggish, but writing ads for the product with nothing to lose is always more fun than trying to try to hold on to a 70% market share.

Nintendo Wii gaming consoles have been flying off retailer shelves, and now the Wii controllers are literally flying around gamers' living rooms. The Wii is famous for its innovative, motion-detecting remote control that lets gamers wave their arms to play a game instead of throttling a joy stick. Some enthusiastic gamers, however, have discovered that twirling the controller by its strap achieves optimum results...until the strap gives way and the controller becomes a plastic guided missile.

Gaming blogs began to report the problem some time ago, and in late November Nintendo actually added a safety precaution page to its web site exhorting gamers to "Hold the Wii Remote firmly and don't let go!"

Now, the blog Wii Have a Problem reports (via vnunet) that "Nintendo has announced that they are investigating the possibility of a stronger strap to take care of over zealous players." (Click here for excellent photo of a Wii remote penetrating the hardened plastic armor of an unsuspecting television set.) In a press conference yesterday, in fact, Nintendo President Satoru Iwata conceded that "Some people are getting a lot more excited than we'd expected. We need to better communicate to people how to deal with Wii as a new form of entertainment."

These are the sort of problems, of course, that a gaming company wants to have. Far better to be Nintendo with its faulty strap issue and torrid first day sales in Europe, than to be Sony with its high cost machine and flaccid sales.

My magazine, Fortune, recently got slagged by the folks at Valleywag for a 2005 article that praised Yahoo CEO Terry Semel for turning the company around and making it a place where advertisers could actually build brands online.

I'm not here to defend the article (which makes many excellent points about online advertising, by the way) but to note another interesting twist: One of Yahoo's biggest fans in the story is Julie Roehm, the freshly ousted head of marketing communications at Wal-Mart. At the time of the story, Roehm was at Chrysler, and she was explaining why the Web in general and Yahoo in particular was a great place to put her ad dollars. Was this story the Fortune equivalent of the Sports Illustrated curse?

The BBC is reporting that about a third of 1,500 kids surveyed swap music via their mobile devices - and even more would like to do so. This isn't legal today, because of copyright issues. But it reminds me of Qualcomm CEO Paul Jacobs' idea of turning the phone into a digital-rights wallet, among other things.

In some cases, he contends, kids just want to share a song that's housed on their mobile phones for a listen or two. He'd like to see the mobile phone equipped with the intelligence to let them share on a limited basis. This is basically what Microsoft is doing with its Zune, (though users can only share Zune-to-Zune, a small universe indeed), so it will be interesting to see if this kind of service takes off.

Israel's Ynet news is reporting that video sharing site Metacafe has been sold, possibly to Yahoo, for $200 million, and the rest of the blogs are jumping -- cautiously -- on the bandwagon. Tel Aviv-based Metacafe is three years old and backed by some big name VCs, including Benchmark Capital and Accel Partners. According to the most recent comScore figures, the site ranks third in video-sharing sites, behind YouTube and Google Video, based on "global traffic and page views." TechCrunch is going with the rumor, but GigaOm is holding back: "We've been hearing about this for the past few weeks, but never from a source with first-hand knowledge of the deal. Both Metacafe and Yahoo, the rumored buyer, deny it up and down." The U.S. public relations contacts for the company are thus far unresponsive.

Why does it matter? If true, the purchase price will be the first hard number to put the $1.65 billion GooTube deal into context -- and it would signal a major new play by Yahoo, hard on the heals of Tuesday's Hollywood Massacre.

On the numbers: October's comScore data puts Metacafe at 3.8 million unique visitors in the U.S. vs. 23 million for YouTube, roughly six times more for YouTube. Let's make the dangerous assumption that the $200 million price tag is accurate. Well, six times $200 million is only $1.2 billion, not $1.65 billion. So, if Ynet is on the mark, then Google paid a 33% premium vs. what this mystery buyer is willing to cough up for Metacafe. Was the big brand on the block effectively worth that extra $400 million? Sounds at least plausible, particularly given that the purchase was made in GOOG shares, and $400 million is less than 1% of Google's current $147 billion market cap. Rounding error for Sergei and Larry, though perhaps not for Mr. Semel.

Microsoft announced Wednesday that it expects to sell one million of Zunes by the end of June. CNET has a straight ahead take on the announcement, noting that Zune marketing director Jason Reindorp says the company feels "pretty good about that number," and that the only big shocker is that brown is the most popular color for Zunes. "Brown is definitely a polarizing color," says Reindorp. "You either love it or you hate it."

But some of the more grumpy blogs don't buy Redmond's optimism. Indeed, NPD reported just last week that the Zune dropped from second to fifth in the U.S. market for digital media players. Could there be damage control at work here?

TechDirt compares the spin to that of a politician."First they try to build up as much hype as possible. Then when it looks like the poll numbers aren't coming in as high as they promised, they insist that they expected it would be a tough fight. But when all the pundits start writing off the politician as dead, they come back and say things are trending up."

Besides, says a TechDirt reader, "The 1M number in June would mean that Microsoft expects zero slowdown in sales after the holiday season - an assumption which bucks every historical trend for any product category during the last ten years."

The real test for the Zune, says paidContent, will arrive soon as the 30-day return period after the Zune's Nov. 14 launch comes to a close. Tune in to see if the tricky try-it-and-return-it-types start dumping their toys.

Being all about the "meta," The Browser doesn't usually gravitate to primary sources. However, we'll make an exception to share with you some (annotated) excerpts from Lloyd Braun's memo to his staff this morning. Think of it as a special bonus stuff at the end of the DVD....

From: Lloyd Braun
To: all-ymg....
Sent: Tue Dec 05 19:24:33 2006
Subject: News from Lloyd

All -

In light of the announcement of the reorganization of Yahoo!, I have decided to tender my resignation as head of the Yahoo! Media Group. [For those who happened to be in sensory deprivation tanks in Big Sur for the last 24 hours.]

Over the last two years, the Yahoo! Media Group has developed and launched a ground-breaking template for the next generation of media experiences on the Internet.... [Blah, blah, Internet...]

[But here comes the real news...] On Friday, December 8th at 3pm PST executive management will join members of YMG's senior leadership team for an all-hands to walk you through the re-organization and the Yahoo! mission moving forward. I encourage all of you to attend to hear more about these changes, what they mean for the Media Group moving forward, as well as to answer your questions. [Break out the egg nog! The Browser welcomes your eyewitness accounts.]

There is much more to come in the months ahead and there are great leaders in place to take you all on the next part of the journey... [All hail our new "great leaders!"]

Best,
Lloyd

And with that, our man in Santa Monica walked, somewhat uncertainly, into the sunset.

Welcome to Phase 3 of Yahoo, Inc. That's how CEO Terry Semel is branding the company's new reality in his very own blog post, and before we get on to the pundits, we'll give Mr. Semel props for going direct to the people. (Very Jonathan Schwartz of him.) Naturally, Semel spins things brightly: "Thirty billion in advertising dollars will come online globally over the next five years. No one is better positioned than we are to take advantage of that. I believe we now have the right strategy, the right structure and the right people to provide the best experiences and results possible to our users, advertisers and publishers."

Semel's optimism aside, the blogs have generally pronounced themselves underwhelmed by the restructuring. For the geeks-at-heart, the problem continues to be that Semel himself, and now heir apparent CFO Sue Decker, lack geek cred. In short, the boring corporate suits are still running the club. As Paul Kedrofsky writes: "It's not a bad decision, nor is it an exciting decision. Instead it seems more like a Yahoo decision, with Decker being smart and aggressive, and at least somewhat more tech savvy than Terry Semel, which is all good, even if incremental. She is a finance person, however, so she is not going to be the go-to strategy person at Yahoo any more than Semel was."

Meanwhile, at Valleywag interim editor Nick Denton has actually run a Draft Obit of Semel that begins "Terry Semel never won much respect from Silicon Valley insiders," and continues with the damning description of Semel as a "low pulse guy." TechCrunch also jumps on that bandwagon, noting that "If Yahoo is really serious about redirection, then no senior executive, particularly Semel, is safe from the chopping block."

Semel aside, there's plenty of glee at the heads that have fallen, notably Mr. Hollywood: Lloyd Braun. Thanks to paidContent for pointing out Lloyd Braun's priceless quote to the Los Angeles Times:

Braun said his resignation was not prompted specifically by the restructuring. "I accomplished most of my goals in coming here," he said. "I'm really ready for another challenge, perhaps one that combines old media and new media."

Umm, right.

Finally, Tom Foremski at ZDNet has a conspiracy theory for media junkies on why the Yahoo announcement came yesterday afternoon as opposed to this morning, pre-market open, as is often the case. It seems that while The Browser was hearing from its own sources, The Journal was busy cutting a deal with Semel & Co. for an exclusive. Problem was, Semel wouldn't show up for the interview. Recounts Foremski: "WSJ editors grew increasingly frustrated with the no show from Terry Semel. They worried that Yahoo might be pre-briefing the rest of the universe and it might lose pole position on the story, so the Wall Street Journal told Yahoo it would go with what it had and publish the story online. That prompted Yahoo to try to scoop the Wall Street Journal and get its version out first."

More as it happens....

A reliable source is telling The Browser that Yahoo is about to announce a major reorganization. That would be consistent with what news.com posted this afternoon, though still a step short of what Red Herring is peddling. We're hearing that COO Dan Rosensweig is out, along with controversial content boss Lloyd Braun. That seems to be what paidContent is hearing, too. The Browser tried repeatedly to reach Yahoo spokespeople for comment on Tuesday afternoon, but they were apparently all on the same corporate call. A Yahoo exec suggested earlier today that no major changes in the executive suite are planned.

If a shakeup occurs, no doubt company critics will be thrilled. They've been braying for change as Yahoo stock price has fallen and rival Google's has soared. Now these critics have what they've been calling for - helped in large part by last month's headline-grabbing "Peanut Butter Manifesto," in which a senior veep urged a companywide overhaul.

Even as critics break out the party hats over today's rumored shuffling, they shouldn't forget that Yahoo remains by far the Web's top destination, with over 500 million unique visitors per month. My guess - change will do Yahoo good and it will remain a major Internet player for the duration.

Newspapers may be dying a slow death, but the competition among online heavyweights for those local advertising dollars couldn't be hotter, or more treacherous. Now Barry Diller's IAC jumped into the fray, launching Ask City, a sort of local directory with maps, that hopes to go head-to-head with Google Local, Yahoo Local, and Microsoft's Live Search. Recall that Amazon made a similar play with their A9 Yellow Pages, but was recently forced to beat an ignominious retreat.

Being late to the party has never been a problem for IAC before, and the early reviews are surprisingly good: "I didn't think an online mapping service could keep a clean interface like the one Google Maps has and still add more great features," writes CyberNet. "Ask has done just that with their new Ask City and it is hard to even describe how smooth the site operates." The O'Reilly Radar has a somewhat more complete, if restrained review, which it concludes by simply noting: "Adding all of this to their already excellent multi-point directions, Ask has definitely made a compelling offering."

Can Diller's crew really go toe-to-toe with the geeks out West? You make the call.

Move over boring old identity theft, here comes identity hacking. CNET reports (via Websense) that there's a worm loose on MySpace that modifies member profiles. Apparently, the worm propagates itself via a Quicktime video: "When played by a MySpace user, the video adds itself to the user's MySpace page and replaces the links on the user's profile with links to phishing Web sites."

The goal, apparently, is to lure unsuspecting users into "giving up sensitive information such as log-in credentials." Call us hopelessly out of touch, but the whole notion of MySpace "worms" strike us as new-ish and wonderfully scary. Sure, CNET notes that this sort of thing has been around: "This is not the first threat to hit MySpace. Miscreants have exploited the popularity of the Web site before to steal personal information and to spread adware." But this changing of profiles is fresh, and we wonder what happens as this takes off in a future world where everyone has an online profile.

As social networks grow up, think of all the malicious business goals that might be pursued. It might be fun for high schoolers to change an enemy's picture, or modify someone's age or relationship status. But what happens when ambitious networkers start inserting themselves as "friends" of powerful people, or start tweaking rivals' resumes? Good stuff.

The Guardian follows this sordid tale in a different direction, noting that the hackers-in-question appear to be pushing their victims towards a pile of Zango videos. Quips writer Charles Arthur: "We're beginning to wonder whether George Bush is going to get around to declaring in a State of the Union speech that Zango belongs to the Axis of Evil." Bellvue, WA-based Zango, it's worth noting, was fined $3 million last month by the FCC for shady practices relating to adware distribution.

The Browser senses great pulp fiction potential in all this.

The Browser was rather surprised to see a story in today's New York Times about the remarkable growth of Internet advertising in Britain. We were surprised both at the story's premise - that the future of Internet advertising is in Britain - and surprised that the normally reliable Eric Pfanner would lend his name to this questionable thesis.

First, give the premise its due: Online advertising is apparently growing 40 percent a year in Britain, and will account for 14% of its total advertising this year. According to The Times, that's "the highest level in the world, and more than double the percentage in the United States."

But to conclude then that Britain has set the benchmark for all countries to emulate is a major stretch. Over in Merry Olde, some observers are scratching their heads. The number alone "doesn't mean Britain has done anything particularly interesting," says MediaGuardian blogger Jack Schofeld. He points out that, because the country is so geographically small ("slightly smaller than Oregon"), almost all of its advertising is national. In larger countries like the U.S., local advertising is much bigger - and no one has really cracked the local nut online.

But the article has a much bigger conceptual hole. If you're an advertiser in the U.S. and you want to reach a lot of people, you put your ads on commercial TV and radio - to the tune of more than $16 billion a quarter. In the U.K., however, you run into a little broadcast hurdle they call the BBC! Yes, there is commercial television and radio in the U.K., but by far the biggest audiences in the U.K. are on BBC's commercial-free airwaves. And so any advertiser seeking to maximize eyeballs is obviously going to choose a medium, such as the Internet, that is growing in reach and relatively inexpensive.

UPDATE: Here is Pfanner's response: The BBC has only about one-third of the overall television audience, and its share has been falling as the digital alternatives proliferate, expanding the potential TV advertising pool. One-third is a big share, of course, but Britain has also been a very vibrant television advertising market until quite recently, and ITV's flagship channel, for instance, has always rivaled BBC1 in terms of ratings. But recently ITV's ad revenue went into reverse just as online advertising took off. And over all, the British TV advertising market, which had been expanding rapidly, has flattened out.

The real story the Times should be pursuing is whether the BBC can continue to dominate both the airwaves and U.K. Web traffic and still maintain its monopoly on the TV licensing fee.

It's Monday and guess what? The media churn continues. Variety reports that David Katz, the Yahoo sports and programming exec "who led the company's first consistent effort at original programming," is no longer yodelling along with the team in Santa Monica.

Katz was an up-and-comer at CBS when he joined Lloyd Braun's Yahoo Media Group in the summer of 2005. That was when some Yahoo types thought it made sense to hire a bunch of high-paid Hollywood talent to compete with Google. (Recall too that the two companies had roughly the same market cap at the time - until, that is, Yahoo's stock price took a dive, giving the online portal a current market value that's exactly one-fourth the size of GOOG's $147 billion valuation.)

Yet another bit of bad news for Yahoo: Its "major video partnership" with Current TV, Al Gore's TV network, is no more. You know you've lost your groove in Hollywood when you get dissed by Al Gore.

But fear not intrepid YHOO investors! Variety reporter Ben Frist says, under a separate byline, that the turnover in the YMG has been a good thing. "[A]fter nearly two years during which they were seemingly stuck in neutral, Yahoo Media Group executives say they now have a clear vision that is starting to bear fruit."

The Browser's not convinced yet. We can't wait for the next episode of Yahoo's own version of 'The Office,' which Rafat Ali at paidContent says may come as early as this week: "we have heard from sources that a major exec meeting across the board (VP level and above) is slated at Yahoo, this Tuesday....not sure what the agenda is, but restructuring the executive portfolios might be one part of it, there's speculation internally."

What's the Monty Python line? "This calls for immediate discussion." As always, The Browser awaits your predictions....

Some readers think that the headline on this interview with Seagate CEO Bill Watkins was over the top. In a freewheeling exchange with Fortune's Jeffrey O'Brien, Watkins said: "Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn."

I personally and professionally found that statement to be astounding, as well as funny and remarkably self-deprecating. That's why, as O'Brien's editor on this story, I moved the quote high up in the story, and also turned it into a headline that, yes, I thought would grab the reader's attention. Does that make us, as one reader put it, "right up there with the tabloids"? I didn't think so, but I'm sensitive to readers' concerns, so let me say for the record: We're certainly not trying to say that Watkins or Seagate promotes pornography per se. I suppose if you read the headline without reading the rest of the story, you might think that we were. So if that's misleading, I apologize. At the same time, I think readers would do better to focus on the fact that a CEO of a public company that makes computer hard drives really did say that the end result of his firm's product is helping people buy more crap and watch porn. Also, it's worth noting that a number of readers wrote to O'Brien saying that the interview made Watkins look like a genuine leader. So go figure.

Is Microsoft (MSFT) a leader or a follower on the innovation front? The blogosphere has picked up the age-old debate once again, focusing on the Zune digital music player and the XBox 360 videogame console. Personally, The Browser is getting a little tired of all the retread. Who cares if Microsoft is a shameless copycat? It's the results that matter, both for consumers and for shareholders. And when it comes to mobile phones and the Internet, which Google's chief mobile strategist calls the ''obvious" future, Microsoft's new Windows Live Search for Mobile seems to be crushing the competition.

Marketwatch's Bambi Francisco dished up some juicy holiday web stats this morning, courtesy of HitWise. Of little surprise: that 25 percent of traffic to online retailers, roughly 19,000 by Francisco's estimates, comes via search engines. Somewhat surprising: even big-name retailers with obvious URLs, like Walmart.com, get a chunk of traffic through search engines. Completing surprising: Social networks like MySpace are now steering members to online retailers. That's good for News Corp.'s Rupert Murdoch, who needs to show that its $580 million bet last year on MySpace generates more than just headlines.

Still, it will be interesting to see how the MySpace ad strategy plays out in the coming months given signs that the mall-like vibe on MySpace is beginning to chafe.

Meanwhile, Hitwise exec Bill Tancer has an interesting list of the top 33 Google properties ranked by their relative market share. At the top, not surprisingly, is the Google home page, which accounts for 78% of Google's traffic. The runner-up, about a marathon-length behind: Google Image Search, at 9.2 percent. And at the bottom? The endearing Google Moon.