A deal with Google is about to shrivel, and now MySpace is facing layoffs and needs a new sales chief, sources "close to" Van Natta and fellow News Corp. newcomer Jon Miller tell Business Insider.

Expectations for MySpace's future were pretty low to begin with; the company's new leaders and their associates have now pushed them so low that the barest gains will make them look like heroes.

(Pic via All Things D)

Van Natta, who has long aspired to run a consumer Internet startup, is an obvious choice. Having fallen out of favor with Mark Zuckerberg, Facebook's fickle 24-year-old CEO, he is spending his exile running a music startup, called Project Playlist, out of an office building shared with Facebook. While Van Natta has managed to extricate Playlist from some of its legal troubles with the music labels, it hardly seems like a gig that encompasses his ambitions. Having worked for Elon Musk and Jeff Bezos as well as Zuckerberg, Van Natta seems capable of dealing with a testy owner-CEO like Rupert Murdoch.

Calacanis, meanwhile, has no qualifications for the job. He tanked his first media company, then sold his second one, Weblogs Inc., for $25 million to AOL, where he accomplished nothing of note after the acquisition. He's since raised far too much money for Mahalo, a Web 2.0 rehash of Yahoo's 1995-era Web directory. Silicon Alley Insider thinks he should be MySpace's new CEO because he worships Jon Miller, the former AOL CEO who played mentor to him before Miller was fired and Calacanis quit. Ever the clever fameball, Calacanis is playing coy and saying "No comment" as loudly as possible.

Miller now runs News Corp.'s Internet operations, so he's the one to pick DeWolfe's successor. We have a suggestion: Hire both! Van Natta can do the hard work of fixing MySpace. While he's affable enough, he hardly seems to crave attention.

Tom Anderson, DeWolfe's sleazy sidekick at MySpace, is every MySpace user's first friend when they sign up. He needs a replacement, too. Why not replace him with Calacanis, the ultimate Web fameball, who seems to measure his self-worth by his number of Twitter followers? He doesn't need any other responsibilities. And as MySpace's Chief Ego Officer, he can still claim to be CEO.

The official story will be that Jon Miller, the new broom from AOL, has swept aside MySpace CEO Chris DeWolfe and his team. But as always, Murdoch alone rules News Corp. And the decision must have been his.

Murdoch's wife, Wendi Deng, is the chair of MySpace China, and that professional relationship has spurred dangerous gossip which can't have helped DeWolfe's standing.

Four years after he bought MySpace, Murdoch has finally rid MySpace of the spammers and scammers who launched it. It is far past time — and yet probably the right moment. Wall Street Journal reporter Julia Angwin's book, Stealing MySpace, has exposed MySpace's roots in porn, spam, and hacking. As the economic tide that boosted MySpace's advertising sales has receded, DeWolfe has been shown to be swimming naked. And Miller, as News Corp.'s newest Internet executive and the latest to have won Murdoch's ear, is in prime position to push out DeWolfe, whose contract expires this fall. (Just one question: If DeWolfe sidekick Tom Anderson is ousted, who will become every MySpace user's default first friend?)

DeWolfe always seemed more interested in throwing parties and dating celebrities than solving MySpace's hard problems. Growth has stagnated for the past year as Facebook has surged. The site's interface remains a shambolic wreck which fails at the most basic tasks, like remembering a user's login. Talented engineers, including COO Amit Kapur, have defected. Slingshot Labs, a MySpace spinoff meant to foster Silicon Valley-style innovation, is an industry laughingstock for launching a me-too celebrity gossip site rather than chasing genuinely new technologies. Given all this, it's possible that DeWolfe's friendship with Deng was the only thing that helped him last so long.

What now for the site? News Corp. is reportedly recruiting a new CEO already. Former Facebook COO Owen Van Natta would be an excellent choice, if he can be wrested away from the music startup he's currently running. Or the company might place an internal candidate from the News Corp. empire, to provide the closer eye MySpace has long needed.

Ah, but those are tiresomely sensible choices. Here are two that would maximize the Murdoch family drama everyone loves: Install prodigal son Lachlan Murdoch. Or put Deng in charge.

Philips is a panicky sort, counseling friends last fall to "buy food and guns" — a bit of mordant meltdown humor reflective of his personality.

But with Miller's arrival, Philips's wit is the proverbial knife at a gunfight. He's no match for Miller, a former lieutenant of Barry Diller at IAC before he joined Time Warner to run AOL from 2002 to 2006, in playing corporate politics and catering to a mogul's whims. And Miller surely does not want a rival with Murdoch's ear.

We'd heard that Philips might take a lesser job running some of News Corp's lesser-known Web properties. But that would mean an exile from News Corp. headquarters — an unattractive prospect for an executive who has earned his keep mostly by keeping Murdoch's favor.

The wunderkind is not just rolling over and playing dead. He may be trying to spin the situation, with a friend saying that Miller's expected to have the same portfolio as Peter Levinsohn, the executive Miller would replace. That's not, as has been reported, the broader role overseeing digital strategy Miller's expected to take.

A sign of how insular the world of big media is: Confirmation of Miller's job offer comes from Ross Levinsohn, who held much the same job before leaving News Corp. to start a venture-capital fund with Miller.

It's all a crazy waiting game until the aging mogul can install his wayward children in power. Most believe that's the reason why Chernin left, as it grew increasingly clear that Murdoch would never let the Hollywood hired hand become CEO of News Corp. But there are plenty of takers for the big jobs available in the meantime.

Miller replaces Fox Interactive Media chief Peter Levinsohn, who, as many inside News Corp. expected, is taking a job with the L.A.-based Fox TV and movie units. Miller, though, will have more power than Levinsohn, running pretty much everything with a URL attached and reporting directly to Murdoch. He'll need that authority to rein in wayward MySpace CEO Chris DeWolfe, who has long resisted reporting to the suits rotating through the executive suite of Fox Interactive Media.

If he takes the job, that is. Papers aren't signed yet, for reasons that are mostly legalese. Miller was ousted as AOL's CEO in 2006, replaced by the astoundingly awful Randy Falco. He's since been looking for a comeback, most recently through the VC firm Velocity Interactive Group — but he's been stymied by a noncompete agreement with AOL parent Time Warner, whose CEO, Jeff Bewkes, nastily decided to enforce after Yahoo invited Miller to join its board.

That noncompete ends in three days. Assuming Miller accepts the offer, and it seems like it would be enormously embarrassing for him not to, he'd be ending one long-running drama and joining another.

(Photo via LAT)

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

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

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

It's as if he thought that playing a game of buzzword bingo would masquerade as strategic thought. A television salesman by trade, Falco was plucked by Time Warner CEO Jeff Bewkes from NBC Universal to replace Jon Miller, in a universally derided move. A commonly held belief among insiders: Falco and Bewkes thought AOL would be sold off by now, with Falco moving on to some role at Time Warner's film and television properties. AOL has continued to embarrass. And so has Falco. The only question is which exit will come first.

Now hardly seems like the time. The pension funds and college endowments which invest in VC funds have been pulling back, as of late. And investments in consumer Web startups — Miller and Levinsohn's specialty — are not looking as wise as they were a year ago. If the duo do raise money in this climate, it will be an impressive feat. If they don't? Then their second careers as venture capitalists may come to an abrupt end.

Some observers say Time Warner executives did a bait-and-switch, tacitly encouraging Yahoo and Miller to proceed with the appointment, and then publicly denying that they ever approved a deal. Backstabbing and double-dealing at the world's most famous agglomeration of corporate infighters? We are not shocked. But we don't think Miller, who saw their work firsthand at Time Warner, ought to be, either. (Photo by Lou Reed/Los Angeles Times)

Candidates for the job who currently work at Microsoft include SVP Yusuf Mehdi, once Microsoft's online chief; Brian McAndrews, the former CEO of Microsoft-acquired aQuantive; SVP Satya Nadella, who runs search engineering, among other responsibilities; and Bill Gates's replacement as chief software architect, Ray Ozzie.

"Yusuf is not an operator and Satya is a possibility but would be a stretch," a source tell us. "I would bet on Brian McAndrews. But McAndrews might not want it as he made serious bank with the sale of aQuantive and may not want to do more than he has to finish his earn out. I mean, what’s the marginal upside for him?"

As for Ozzie, Kara Swisher quotes all kinds of Microsoft developers who hope he'd take the job,but another source tells us: "I think he's got the gig he wants: basically, being a visionary. And he's great at it."

One problem with Ozzie, says our source: "Only thing I've heard so far is [the candidates are] not internal." So scratch Ozzie and the rest off the list!

"My guess is they'd want to poach from Google, for appearance's sake," says our source. He suggested we take a look at ex-Microsoft employee, Mark Lucovsky — head of Google's search APIs. The problem with Lucovsky is that Microsoft CEO Steve Ballmer might not want to take him back — he reportedly threw a chair when he heard Lucovsky was leaving Microsoft for Google in 2005.

Swisher's Microsoft sources also nominated former Yahoo COO Dan Rosensweig for the job, but a source says: "Dan would never do it given loyalty to Yahoo."

So who's it going to be? The people we talked to gave us the usual boring non-answers — "I imagine Microsoft might take a little time to really look around. There is no massive rush." So we'll suggest another scenario: Why doesn't Microsoft pull a Sandberg?

Sheryl Sandberg was a relatively obscure VP at Google, but she had an important job — overseeing the automated systems that pulled in Google's billions of dollars in advertising revenues.

Our guess: Someone from AOL, possibly Lynda Clarizio, boss of AOL's Platform-A advertising division. Microsoft seems eager to buy AOL —AOL dealmakers met with Microsoft in Seattle last week, and yesterday, AOL started cutting costs in an effort to pretty itself up for a sale — and Clarizio would probably be the top executive to come over in the deal.

AOL CEO Randy Falco wants to get a Hollywood job at Time Warner after putting in his time at AOL. His henchman, Ron Grant, has lost favor of late. Is Clarizio too salesy for the top online job at Microsoft? Probably, but then, there is evidence Microsoft CEO Steve Ballmer might not mind.

(Photo by adpowers)

Why would respectable Web industry executives like former Yahoo COO Dan Rosensweig, former Fox Interactive boss Ross Levinsohn, or Levinsohn's partner at Velocity Interactive, ex-AOL CEO Jon Miller — the kind of names shareholders would trust — sign up with Icahn just in time to get replaced by Microsoft's Kevin Johnson? And why would they jinx their chances at a getting named to the plum job by Yang itself — a far more comfortable coronation? That's why those names never showed up in an Icahn press release. It's also why Icahn's board slate is filled by a bunch of no-names and Mark Cuban, whose feud with Yahoo is now nearing a decade in age.

So, what did Carl Icahn really do wrong? Buy his first share of Yahoo.

(Photoillustration by Jackson West; photo of Icahn by AP/Mark Lennihan)

Vallewag: What would you think of Jon Miller going to Yahoo?

Calacanis:

Jon Miller would be amazing for Yahoo because he is extremely good at building display advertising businesses and buying young startups. Remember, when they let him go he was coming off back to back 40%+ gain quarters in advertising revenue—second only to Google (and well ahead of Yahoo). His biggest strength at AOL—in my mind—was buying promising startups and giving them tons of support, no red tape, and breathing room. Yahoo needs new blood and a focus on display advertising, with Ross [Levinsohn, former CEO of Fox Interactive and Miller's partner at VC firm Velocity Interactive] at his side you would have a very potent operator and M&A team.

Yahoo's best strategy right now is probably to build display advertising while buying and growing promising startups. Yahoo needs growth, Jon and Ross are growth guys (i.e. MySpace, Advertising.com, Weblogs, Inc, etc). As a bonus you have hundreds of VP/SVP/EVP level executives out there who are loyal to Jon and Ross, so you might see a talent influx with them at the helm, and talent wins.

Valleywag: You think he'd take the job?

Calacanis:

• Pro: It is the most challenging job in the space second to AOL
• Pro: Having reinvented AOL this would be cake walk/much more pleasant.
• Push: It would require a move from East to West coast—which is both a + and -
• Pro: It would be a great way to show the folks at [Time Warner] who's the man

I'd say if he gets the call he would most likely take it... big opps like this come along once every 5-10 years.

• Former Fox Interactive boss Ross Levinsohn and AOL CEO Jon Miller, now partners at Velocity Interactive, seem to come as a pair. Levinsohn is best known for acquiring MySpace for Fox Interactive and quitting the company after it wouldn't buy Digg. But Levinsohn is also known for bullying entrepreneurs — once, so badly that renowned angel investor Ron Conway reportedly "flew off the handle" at him. In some quarters and in Jason Calacanis's heart, Miller gets credit turning around AOL. But like any exec, Miller has his detractors at AOL and they came out of the woodwork when he was fired last year. One described him as
  

  An executive over 4 years that put more incompetent people in high-places (e.g., McKinley) while firing (Govern) and letting reams of talented folks (e.g., Kotay, list-o-long) leave that were passionate and—at least—somewhat competent, and were actually trying to foster some core innovation and synergy.

• OpenTable’s CEO Jeff Jordan is on Yahoo shareholders and board members' wishlist, just like he was on Facebook founder Mark Zuckerberg's list to become COO of that company before it settled on Sheryl Sandberg. An eBay veteran, Jordan was thought to be in line for Meg Whitman's job until he took over as OpenTable's CEO in 2007. His reputation as a "product Nazi" led Valleywag to endorse him for Yahoo's top job way back in November 2006.
• Tim Armstrong heads up Google's ad sales force and the unit is perhaps respectably profitable enough for Yahoo shareholders and board members to include him on their list. We wonder, however, if the board knows about Armstrong's involvement with sketchy search engine spam company Associated Content.
• Why wouldn't Yahoo's board and shareholders want Microsoft’s Kevin Johnson for the company's top job? Ever since Microsoft CEO Steve Ballmer announced a bid to acquire the company on February 1, no one's given more thought to running Yahoo. Johnson's even written several memos on the topic — showing great ability to include exclamation marks after the company's name while still respecting the need for capital letters.

That's because Miller and Levinsohn had announced in August a similarly named vehicle, Velocity Investment Group, for investing in startups, in conjunction with General Atlantic Partners, a buyout fund. That Velocity never lived up to its moniker, apparently.

No matter. The real question is, do you want to sell your startup to these guys? Ross Levinsohn may have access to $1 billion in funding now, but he's still the guy "bullying around little startups, demanding special deals because he's a famous CEO," as a source once told us, explaining why legendary angel investor Ron Conway can't stand the guy. As for ex-AOLer Jon Miller, well, he's not exactly a king of Pessinus.