Rasmus Lerdorf, inventor of the PHP programming language, confirms he is leaving the company. "It has only been a couple of days," he told us by email yesterday. "I really don't know what is next yet... I am enjoying having a bit more time to play with pet projects this week."

Lerdorf, whose widely-used programming and templating system has been especially popular among Web startups, declined to elaborate on why he left Yahoo. But he was blunt about the matter on Twitter this past summer, just moments after Yahoo announced a pact in which Microsoft would power its search results — previously handled by in-house code — while Yahoo would continue to sell ads against the results:

If we had to guess where Lerdorf might end up, we'd lay our money on Facebook, a PHP shop and a fast-growing one at that. The massive social network has no doubt pushed Lerdorf's language to the edges of its performance envelope. More importantly, the young company shows no inclination to outsource software development to one of its largest competitors and turn itself into a second-tier advertising network.

(Pic by Aaron Hockley)

The most likely scenario is presaged by the logo above, used by the two companies on a website about their deal: Yahoo as a division of Microsoft. For 10 years, Microsoft will power Yahoo searches, while Yahoo will sell the ads. Assuming Yahoo can grow and remain viable — a big if — Microsoft will have every incentive to buy the company at the end of the deal, and Yahoo will be heavily motivated to sell. Microsoft will want to retain Yahoo's traffic and sales force; Yahoo will be loathe to swap out the search technology behind all its sites.

Alternatively, Yahoo continues to flail. Under that scenario, Microsoft's Bing search engine will at least be able to exploit Yahoo just as Google once did; Yahoo gave Google crucial revenue and visibility early in its growth, and will give a similar boost to Bing. At the end of 10 years, if Yahoo is still around, Microsoft will simply walk away, leaving Yahoo to crawl into a corner and die.

In any case, it's fun to see Yahoo CEO Carol Bartz, no doubt mindful of the need to clear antitrust regulators, finally acknowledge Google's power over her company. In a new video, she says this deal gives Microsoft and Yahoo "the scale necessary to compete against Google, which dominates the market with 70% of all search." Barely two months ago, she bit off a CNBC reporter's head for saying basically the same thing. Compare/conrast in the video at left. There's no denying Google's power now; indeed, it's the main rationale for the deal.

The pact will be announced within 24 hours, reporter Kara Swisher writes. It's been a long time coming. Given the two companies' stock performance (see chart below), and the level of, uh, charisma their CEOs posses, it's no wonder it took this long to screw up the courage to take on Google together. Should be entertaining to watch.

Eric Schmidt of Google and Carol Bartz of Yahoo both submitted to interviews with Fox Business Network this week. And they both came across as peeved about having to answer any questions about Microsoft's upstart search engine in the first place. But it's no wonder why they took to the airwaves right as Bing was making it's big publicity push: With fickle user bases that can switch to competing software with the flick of a mouse, mindshare is becoming almost as important to tech companies as it is to celebrities. Hence, Twitter on The View and Oprah Winfrey Show.

In this case, the executives need not worry, as they happen to be right: A five-day ratings blip for Microsoft's Bing is evidence that people sampled the new search engine, not that they're switching.

Mayer is in charge of Google's core search engine, which was famed for its incredibly rapid innovation ten years ago. But now? The 20,000-person Internet conglomerate has become as glacial in its development as Microsoft or IBM. For example: When will be able to search the words spoken in YouTube videos? "Five years, maybe ten," says Mayer. And searching images? "Ten years, maybe fifteen." When did Google become a company where that pace of invention was tolerable? Perhaps around the same time Mayer started dabbling dilletantishly at cross-country skiing and marathon running, where she's consistently placed in the back fo the pack.

And yet Mayer is pityingly dismissive of Google's main competition, Yahoo, saying they've "lost a lot of good people." When Rose presses on whether she'd want to see Microsoft buy Yahoo — a move which would arguably strengthen the combined entity's search market share, she demurs. "We really think an independent Yahoo's better for the Web," says Mayer. Translation: She wants a Yahoo that's providing just enough competition to keep Washington's antitrust cops off of Google's back — but not enough that Google might have to innovate at a pace faster than 10, maybe 15 years.

Facebook is unveiling a redesign (left) which replaces its friend-tracking News Feed feature with the Stream. The biggest difference: Corporate Facebook pages, for which users sign up to be "fans," can now place stories in the Stream much more frequently than they did with the News Feed.

Through a feature called Facebook Connect, Facebook already collects activities on other websites — like Flickr photos, YouTube videos, Digg headline votes, (and, yes, comments on Gawker Media sites like Gawker and Valleywag) — and posts them in the News Feed. Those will become even more prominent in the Stream.

The result: Facebook profiles will show less of what your real friends are doing, and more of what corporate pals like Starbucks and Ben & Jerry's are up to.

Facebook is not alone. Twitter's investors have been hinting that they're going to make money by helping companies have a presence on the site and get their messages out to users. It's not advertising like old-school banners or Google's text ads — it's something new, and more insidious.

Valley insiders call it "lifestreaming," but a more common term is "aggregation." ("Lifestreaming" is not to be confused with "lifecasting," which means broadcasting your life 24/7 on a mobile webcam.)

The trend was arguably pioneered by FriendFeed, a startup little-known outside Silicon Valley founded by some ex-Googlers. Like Facebook, FriendFeed pulls together updated of users' activities from across multiple websites and lets users comment on them. It has mostly been embraced by crazed early adopters who sign up for every new website that comes along. For people who have never heard of Plurk or Reddit or BrightKite, it's not as useful today — but the startup's ambitions have nevertheless sparked a competitive race for a market that barely exists today.

Google, the current king of online advertising, is racing to catch up to FriendFeed and Facebook. Last year, it poached Yahoo executive Bradley Horowitz, who formerly oversaw Flickr and other social websites, to run a secret social-networking project. We hear that's coming to fruition, and may be based on Google's Blogger blogging site, which already has user profiles. (Orkut, a Google-owned social network, will probably fall by the wayside; it is losing ground to Facebook in the few countries, like Pakistan, where it has dominated.)

Yahoo, even without Horowitz, has been proceeding with a plan to build a social profile; it may launch next month, according to a Yahoo insider. And AOL spent $850 million on also-ran social network Bebo, which is now merging with its AOL Instant Messenger chat client, in an effort to catch up to the lifestreaming trend. Microsoft, too, is experimenting with a social update service.

The goal with all of these is the same: Gather up users' scattered online lives, and then daub the result with personalized, real-time ads. Instead of waiting for you to search for something, advertisers will target every step you take on the Internet.

The irony, as ever in Silicon Valley, is that everyone is racing to corner a market that may not exist. Twitter is arguably the purest lifestreaming startup around, and it's not making any money at all; all of its business schemes are currently just dreams. Facebook's expenses grow with every user it adds. And yet Google, Yahoo, Microsoft, and AOL seem convinced that lifestreaming is a business they need to be in. Could it be, in the end, that our lives are not interesting enough for a commercial break?

A ludicrously patchy trial balloon lifted off this week, airing the notion that Microsoft might fund some kind of complex buyout of Yahoo, at a knockdown price of $20 billion — less than half what Microsoft offered last February. It was swiftly shot down: If Microsoft wanted to get its hands on Yahoo, why would it loan someone else the money to buy it?

Another tall tale is making the rounds: that Sue Decker, Yahoo's president, is still a candidate to replace founder Jerry Yang, who's stepping down from the CEO job after a disastrous year and a half. (Anyone care to bet on whether one of the "sources familiar with the search" who told CNET News that Decker was a contender was Decker herself?)

Decker, a former investment banker, wrecked her credibility with Wall Street through overoptimistic forecasts. Never a strong manager, she similarly killed whatever loyalty Yahoos had left for her through her mistreatment of key underlings. (She had Wenda Harris Millard, Yahoo's former U.S. sales chief, locked out of her office over the weekend when Millard told Decker she was planning to leave — and only months later thought to invite Millard to a farewell party, which Millard refused to attend.)

What Decker has going for her: She's already in place, and is a known quantity. If Yahoo's CEO search utterly fails to find an outside candidate and doesn't settle on a board member, Decker is the board's only option. John Chapple, a board member who was previously CEO of Nextel Partners, has said he's no longer interested. One of the outside possibilities, Vodafone CEO Arun Sarin, has reportedly dropped out. Another, former Autodesk CEO Carol Bartz, has yet to express any enthusiasm. But what does it matter that you have a known quantity, when you have taken that quantity's measure and found it lacking? Insiders whisper that Yang, Yahoo's dithering founder, is loyal to a fault, and that's the only reason Decker has not been fired.

If Yahoo ends up with no choice but Decker, it will surely spell the end of the company. What options will she have, other than to sell it at a cut-rate price to Microsoft?

How depressing for a company once worth more than $100 billion, which promised to bridge Hollywood and Silicon Valley and dominate new media. It still has formidable assets, and valuable businesses. Why does no one know what to do with them?

Need more examples? Here are commercials from MSN, Yahoo, and Ask.com. (I found them using Google and YouTube, a Google-owned video-hosting site.) Do any of them articulate a reason to switch search engines?

If so, Microsoft may have gotten Yahoo's search business on the cheap. Our tipster writes:

Today is the end for Yahoo Search. Sean Suchter just left for Microsoft. Everyone in the office is shocked. I've been on the Yahoo Search team for a while and he is the one key executive that it all depends on. If Microsoft has convinced him to leave and join them, they won't need to buy Yahoo Search. We will just all join Microsoft anyway. I am definitely going to send him my resume.

Rumor has it that Yahoo already lost a search executive, Qi Lu, to Microsoft; but Suchter commanded the loyalty of many within Yahoo's search group. These names may not mean much to anyone outside engineering circles in Silicon Valley, but they amount to this: If Microsoft has recruited Suchter, it has gotten the heart of Yahoo's search technology without the fuss of actually buying it.

That will please many on Wall Street who want Yahoo to get out of search; the company could save billions of dollars a year in expenses by dropping the business altogether, and serving up search results from Microsoft or Google's index of the Web instead, as sites like Facebook and AOL.com do today. Yang had an expansive vision of Yahoo as a one-stop shop for advertisers where they could buy both search and banner ads. But he dealt the image of Yahoo's search a blow when he tried to do a deal with Google to have the search giant sell some of the ads that appear on Yahoo's search results. Regulators in D.C. blocked the deal, but the damage was done.

Engineers like to be on a winning team — or at least one that's fighting the good fight. Microsoft may be an underdog in Web search, with a pitiable market share which keeps shrinking, but its top executives are obsessed with beating Google — and they seem more secure in their offices than Yang. Microsoft still has an unsavory image in Silicon Valley, but for coders who have been dealt a drubbing for years by Google, it's an adequate revenge vehicle.

Here's the memo on Suchter's departure:

From: Tuoc Luong
Date: 11/18/08 3:43 PM
To: Yahoo Search Team

Hi Everyone,

Unfortunately, I have to give some bad news to you. Sean Suchter has resigned. Sean’s last day will be December 19th.

Some of you will find this news shocking given that Sean has been a Gibraltar rock at Yahoo and in particular for the Search team. . I understand this.

I will point out that we’re on a good trajectory. We’ve released some good products and capabilities and the industry is beginning to take notice. We’ve closed the gap in Algo relevance and making great strides in building the next generation differentiated search experience and step function in relevance – not to mention infrastructure overhaul that prepares us for the future.

I came here to take on Google because I believe Yahoo above all is best positioned to take the battle to Google. I think we’re on the right path to changing the tide and would love to see everyone make the journey but I respect Sean’s personal decision. I’m committed to continue the battle against Google as long as Yahoo positions Search to be competitive (and I believe we are). I hope each and all of you feel the same way and stand with me to battle Google.

I’ve asked Arnab to step up and take over Sean’s role as head of YST. Just as Sean has been a strong arm for me, Arnab has been a strong arm for Sean. Although Sean casts a large shadow, I believe Arnab will step up to fill the hole with your support. Arnab will cast his own shadow as the new leader of YST and it’s the same YST team that has deliver great products like Search Assist, Secure Scan, SearchMonkey, BOSS, numerous MLR and QRW release to close the GAP in core relevance.

Sean and Arnab have been communicating to the YST leaders about the changes. Arnab has been thinking and discussing the new organization with people. He will send out an e-mail describing his organizational thoughts and plan for YST soon. I believe with the support of other leaders (myself, Bharat, Yongdong, Nam, ..etc), Arnab will fill the void and continue the battle with Google. I urge everyone to support Arnab in his new endeavor.

Tomorrow, I’ll be holding an all managers meeting to discuss the changes and Q&As.

Please wish Sean the best in his future endeavor and congratulate Arnab in his new role.

Thanks

Tuoc

(Image via donquijote.cc)

Apple, where cofounder Steve Jobs returned to power in 1998, is up 600 percent since the beginning of 2002. Amazon.com, where Jeff Bezos has reigned as CEO more or less uninterruptedly since the online retailer's founding, tripled its worth. Google, where cofounders Larry Page and Sergey Brin form a troika with hired-hand CEO Eric Schmidt, has also tripled in value since its inital public offering in 2004. These gains remain despite the stock market's punishing fall.

What about Yahoo, eBay, and Microsoft, where founders handed over the company to professional managers? They are all back where they started almost seven years ago. Under former CEO Terry Semel, Yahoo had a brief golden age in 2004, where it outperformed all the other big Internet companies; it ended just as Google began its relentless rise. Meg Whitman overstayed her welcome at eBay, presiding over its stagnation before handing over the CEO job to John Donahoe — like Whitman, also a management consultant by training. Microsoft CEO Steve Ballmer has proven that he's no Bill Gates; the stock has flatlined under his leadership.

Under Yang, the stock has gone down, down, down, interrupted only by the hope that Microsoft might buy the company and in so doing, give its employees the leadership and sense of purpose they so desperately crave. Does that disprove the value of founders? No. Rather, it suggests that by abandoning his company when it was merely a toddler to be reared by strangers, that he was never much of a father figure to begin with.

interesting analysis but i would also argue though that much of this is simply that members of internet's "C" team (AKA the people who have been running MSN) are jumping to opportunities created by the departure from Yahoo of the internet's "B" team (AKA Yahoo employees circa late 2008). left on the sidelines in dulles: the internet "D" team.

Joanne Bradford, a longtime sales chief at MSN who later headed up Microsoft's content operations, now runs U.S. sales. Jeff Dossett, after a protracted job dance with both Microsoft and Yahoo, just took over Yahoo's "audience" group, which oversees its media websites. And Eric Hadley, another longtime Microsoftie, has just gotten a job running marketing.

The three all know each other well from MSN and form a tight-knit cabal. And one thing drove them from Microsoft to Yahoo: Microsoft's senseless obsession with Google.

MSN has always been an oddball operation at Microsoft. Is it not, at its heart, a media company. That Google figured out a way to turn attracting an online audience and selling advertising into an algorithm infuriated Microsoft's leadership — but the thought that the Web might be a software business after all held a deep attraction to them.

Google's strength is in search advertising. And search advertising is bought, while display advertising is sold. Keyword ads practically sell themselves, while banner ads require the careful cultivation of human links between Web publishers and advertisers.

In their display-ads sales, Microsoft and Yahoo both took their eye off the ball, distracted by Google. Microsoft will remain distracted, possibly for all time. But Yahoo is beginning to rebuild an ad-sales operation badly wounded by Yahoo president Sue Decker's mishandling of sales chief Wenda Harris Millard.

That's what Bradford, Dossett, and Hadley have figured out. If there's still a role for humans in the packaging of audiences for advertisers, it's going to be filled at Yahoo, not Microsoft. It is a chancy, contrarian bet; running up against both Google and Microsoft takes guts. But it's no coincidence that so many Microsoft executives are now at Yahoo.

NEIL MCDONALD: So advertising and all that business model change that certainly has to be the driving force for why you were very interested in acquiring a company called Yahoo, whose stock we noticed has continued to drop. So we have to ask you if the acquisition made sense eight months ago, why wouldn’t it make even more sense now, now that the price would presumably be a lot lower?

STEVE BALLMER: Well, I don’t know if the price would be lower. We offered $33 not too long ago, and it’s $11-1/2 today, and so I don’t know what price might have really gotten the job done. It’s clear that Yahoo did not want to sell the company. It didn’t want to sell when we offered $33. You’ve got to believe they don’t want to–if they thought the company was worth more than $33 six months ago, they probably still think it’s worth at least $33 today. And so I think what we learned through that is, look, they want to remain independent. Perhaps there will continue to be opportunities to partner around search. We’re not in any discussions with them, but that was an offer we made after the acquisition had fallen through. We’ll see. I still think it would make sense economically for their shareholders and ours.

Microsoft spokesperson Frank Shaw just emailed me, asking me to attribute this to a Microsoft spokesperson: "Our position hasn’t changed. Microsoft has no interest in acquiring Yahoo; there are no discussions between the companies." Says a Microsoft spokesperson. So Microsoft's CEO thinks a Yahoo deal is a good idea — he's just not interested in it. There you have it: Microsoft is officially uninterested in good ideas. We always suspected as much, but it's nice to get it on the record.