In a quarterly letter to investors released on Tuesday, Bill Miller, the star stock-picker at U.S. asset manager Legg Mason Inc.,estimated fair value for Yahoo to be near $40 per share, versus Microsoft’s original offer of $31 per

share.

Microsoft “will need to enhance its offer if it wants to complete a deal,” Miller wrote in a February 10 letter, one day before Yahoo formally rejected Microsoft’s plan for the company.

“It will be hard for (Yahoo) to come up with alternatives that deliver more value than (Microsoft) will ultimately be willing to pay,”

Miller wrote. “We think this deal is a strategic imperative for (Microsoft) and that (Yahoo) is in a tough spot if it wishes to remain independent.”

Miller’s comments came as major institutional Yahoo shareholders have been working behind the scenes to get the parties to strike a deal, analysts say. Around 53 of the top 100 big funds in Yahoo hold shares in both companies, according to the most recent shareholder data available from September.

Institutional shareholders hold about 75 percent of Yahoo’s stock, according to Reuters data, versus 10 percent for company insiders, including co-founders David Filo and Jerry Yang.

Legg Mason Capital Management, the unit of Legg Mason run by Miller, owns more than 80 million Yahoo shares, or 6 percent of the company, trailing only Capital Research & Management’s 11 percent holding.

Yahoo on Monday turned down Microsoft’s bid, now valued at $41.7 billion, saying it did not properly assess the value of Yahoo’s vast audience, online advertising investments, cash generation and growth prospects of its overseas holdings.

Microsoft responded the same day by saying its offer was “full and fair,” but stopped short of saying it would not raise its price.

Redmond, Washington-based Microsoft also said it reserved the right “to pursue all necessary steps” without specifying if it plans to take its bid straight to Yahoo shareholders.

COUNTER OFFER

Analysts expect Microsoft to raise its bid to at least $35 a share, but some believe it could be persuaded to go as high as $40.

RBC Capital analyst Jordan Rohan said major funds are likely to grow impatient with Yahoo to get a deal done if Microsoft raises its bid a few dollars to the mid-$30s-a-share level and sweetens the cash portion of its existing offer.

“The more vocal funds are almost threatening Yahoo that they better take the next offer,” Rohan said.

Yahoo shares are now trading at a 2 percent premium to Microsoft’s cash-and-stock deal, indicating investors expect Microsoft to raise its bid.

Legg Mason’s Miller noted Yahoo shares had been trading at a four-year low prior to Microsoft’s offer and the stock was trading above Microsoft’s bid price for all of 2004.

Yahoo shares fell 30 cents, or 1 percent, to $29.57 on the Nasdaq on Tuesday. Microsoft shares rose 13 cents to $28.34.

Yahoo continues to lose Web search market share to Google Inc. Last month, it disappointed Wall Street with its 2008 revenue outlook as it promised to cut jobs and invest more in online advertising work.

According to employees at the Sunnyvale, California-based company, Yahoo began carrying out those lay-offs of up to 1,000 employees on Tuesday. A Yahoo spokeswoman declined to comment.

Several Wall Street analysts said the chances of alternate bidders for Yahoo emerging have grown remote because any deal would

have to be structured in such a way that it can compete with a roughly 60 percent premium implied by Microsoft’s bid.

Citigroup issued a research note on Tuesday saying the likelihood that Microsoft will offer a higher bid to clinch a deal with Yahoo

is rising. It now puts the probability that this will occur at 55 percent.

The second-most-probable scenario with a 30 percent chance, according to Citigroup, is that Yahoo remains independent and outsources its search to Google.

Speculation has swirled in recent days that Yahoo is considering potential deals that could involve pairing off with either Time

Warner Inc’s AOL or News Corp’s MySpace, if their media companies were prepared to spin these businesses off.

Media investor blog Silicon Alley Reporter quoted unnamed sources on Tuesday saying that News Corp and Yahoo are still discussing a possible transaction, but provided no details.

But when News Corp Chairman Rupert Murdoch was asked last week by a reporter whether he was considering a Yahoo deal, he replied: “I think that day has passed, but you never know.”

By Muralikumar Anantharaman and Daisuke Wakabayashi
Source : REUTERS

Mr. Fox is among a small group of Google employees who keep a watchful eye on the vital signs of one of the most successful and profitable businesses on the Internet. The number of searches and clicks, the rate at which users click on ads, the revenue this generates — everything is tracked hour by hour, compared with the data from a week earlier and charted.

“You can see very, very quickly if anything is amiss,” said Mr. Fox, director of business product management at Google.

Mr. Fox and his “ads quality” team can also quickly see whether something is working particularly well. His group’s mission, to constantly fine-tune Google’s ad delivery system, has one overriding objective: show users only the ads they are most likely to be interested in and click on.

Google runs a complex auction-based system that determines which ads will appear where, and in what order. Every time the team alters the formulas that select and rank ads, Mr. Fox can run a test and quickly see the effect of the changes on users, advertisers and Google’s revenue — which, in this year’s first quarter, came in at the rate of more than $2 million an hour.

The job has given Mr. Fox, a soft-spoken 29-year-old with an obvious affinity for nuance and numbers, a detailed understanding of the complex dynamics at work inside Google’s ad-driven economic engine.

Mr. Fox, who graduated from Harvard with a degree in economics and spent two years at the management consulting firm McKinsey & Company before joining Google in 2003, also helped organize its Revenue Force. This select group of engineers, sales and finance people, product managers and statisticians from across the company is charged with keeping top executives apprised of the forces that make Google tick.

Google reveals little of these forces to the outside world. Even on Wall Street, many experts describe Google as a giant black box that they struggle to comprehend.

In recent months, for instance, analysts and investors grew increasingly worried about reports of a decline in clicks on Google ads in the United States, which they interpreted as a sign that Google’s business could be suffering from the economic slowdown. But inside Google, Mr. Fox and others were growing confident that the company would do just fine.

“I wouldn’t quite go so far as to say we are recession-proof,” said Hal R. Varian, Google’s chief economist. “But we are recession-resistant.”

Google’s financial results for the first three months of the year surpassed expectations. Still, some analysts point out that Google’s growth is slowing, especially in the United States. The extent to which that slowdown is the fault of the economy or just the size and maturity of Google’s business remains a matter of debate on Wall Street.

Mr. Fox acknowledged that searches and clicks in some areas, like real estate and travel, have grown more slowly recently. But he noted that there is not an exact correlation between clicks and revenue: “Clicks are only part of the story.”

The idea of linking ads with search results was first developed not by Google but by GoTo.com, which later changed its name to Overture Services and then was bought in 2003 by Yahoo. Overture ranked ads based on how much advertisers were willing to bid for a certain keyword. The higher the bid, the better the placement.

As Google’s engineers developed their own search advertising system, they understood early on that giving top billing to the highest bidder would have little benefit for Google if that ad did not attract clicks. That is because advertisers typically pay Google only when a user clicks on their ads.

So Google decided to rank ads based on a combination of bid price and “click-through rate,” the frequency with which users click on a given ad. Mr. Fox’s team took things from there and gradually became better at figuring out what ads would work with users.

Yahoo tried to catch up by building a new search advertising system that works more like Google’s. It helped increase revenue, but by Yahoo’s own account, Google still earns 60 percent to 70 percent more on average than Yahoo on every search. Microsoft has also lagged, in part because it lacks enough advertisers. It acknowledged as much with its recent attempt to buy Yahoo.

Mr. Fox said Google’s ability to constantly fine-tune its operations was intricately linked with its obsession with measuring just about everything that happened on its system.

My business is coming up the ramp;
Some other business is dead.
The other business that is dead is, unless you are speaking to a very depressed person, not the one he or she is in.

So it depends on who you are speaking to, or to whom you are speaking, depending on whether that grammar stuff matters to you.

Following are the businesses that are dead, if you hang around with enough bullsh**ters in a wide enough range of fields:

• The theater
• Movies in movie houses
• Public schools
• Radio, because of satellite radio,
• Satellite radio, because of Internet radio and ITunes
• Broadcast television, because of cable and Internet video
• Cable television, because of satellite TV and Internet video
• Satellite television, because of digital television conversion and Internet video
• Internet video, because of digital television conversion and downloading
• DVDs, because of downloading
• Downloading, because of the ubiquity of broadband streaming
• Personal computers with hard drive capacity, due to cloud computing
• Land-line telephones, because they’re so 20th Century
• Any internet company that is not Google (GOOG), for obvious reasons
• Google, because, well, how long can they keep THIS up?
• Books, of course
• Magazines, except the ones that we’re on the cover of, and…
• Newspapers

The only one that everybody agrees about right now, among the b.s.-ing class, is newspapers. Newspapers are dead. Dead dead dead. Yes, Rupert Murdoch doesn’t seem to believe so, but he is incorrect in this, or doesn’t see the truth right now, or whatever. Because you know newspapers? They’re dead.

This is not helped at all by the appearance of Sam Zell, who bought Tribune (TXA), and whose chief operating officer recently announced they would begin to judge the value of journalists by the column inches they produced in a year. This is sort of like saying that Chichi’s is the best restaurant in America because it serves the greatest weight in nachos.

That aside, however, everybody does agree: they’re dead. One day there will be no newspapers, because No Young People Read Newspapers. Is this true? My kids are of sentient age. They read newspapers. In fact, they’re both knee deep in Obamamania right now, and read everything they can get their hands on. I see people reading newspapers on the street, in parks, on subways and buses… when you get a bad story in the newspaper it still ruins your day…

But no. They’re dead. Know why? Because Advertising is Down in newspapers. Now of course, advertising is sort of down across the board, and actually MUCH more disappointing on all those social networks everybody loves so much… and newspapers still attract a HUGE proportion of total advertising…

But no. Newspapers are dead. And advertisers read that and, timid little lambkins that they are, cut their budgets even more, because after all who wants to advertise in a dead medium?

Finally, newspapers are, you know, dead because they Haven’t Changed With The Times and News Is A Commodity That You Can Get Just As Well Online.

Except guess what. It’s not. I’ll just say what I think and get out of here. As always, if you agree, lob something in.

• I like newspapers. I look at a few every day and even read some of each;
• I don’t believe everything I read in the paper, but I’m interested in what they think is interesting;
• Newspapers have been around a long time, from medieval days through the time of Horace Greeley (above) and beyond. Radio didn’t kill them. TV didn’t kill them. The internet will not kill them;
• If there were no newspapers, all we’d have is the Internet, whose capacity for the promulgating and dispensation of bulls**t is unparalleled;
• I am NOT interested in a PERSONAL, daily e-mail informing me only of the stuff I pre-select as of interest to me. What’s the pleasure in that?
• If we all had a euro for every article in some medium that declared another medium dead, we’d all be Europeans;
• Aggregators can only aggregate content if there is content to aggregate. No content, no aggregators;
• Contrary to popular belief, journalism is an actual profession that takes training, talent and skill, and one of the most rigorous and necessary places in which it’s pursued is in newspapers;
• 89% of all citizen-journalists are just full of it.

Now you guys in newspapers could probably help a little, going forward. Why not stop writing pieces every day about how dead every other industry is? Just a thought, tough guys.

Nokia, the world’s biggest handset maker, is buying out its fellow shareholders in Symbian, the UK-based handset software company. At the same time, the Finnish giant is throwing Symbian’s mobile phone operating system open for royalty-free use.

Symbian’s operating system software, originally developed by UK company Psion, is today used to operate two-thirds of smartphones – handsets with computer-like capabilities – and 6pc of all mobile phones.

However, it is facing new threats to its dominance, from Google’s Android and Apple’s iPhone, adding to existing rivalry from Microsoft, with Windows Mobile, and BlackBerry maker RIM.

Nokia was quick yesterday to dismiss the idea that its moves were simply a reaction to its rivals. “This is a market-making move and looking at it as a response to anything would not do justice to what we are doing,” said Kai Oistamo, executive vice-president of Nokia.

But analysts were in little doubt. “This move’s a shrewd response to growing threats from other providers of mobile phone software,” said Geoff Blaber of industry watchers CCS Insight.

advertisementMr Blaber made particular reference to the “open-source” LiMo Foundation as well as Google’s Android, which also promises to offer handset makers an operating system at virtually zero cost.

Nokia is launching the non-profit Symbian Foundation, which will unite the Symbian’s operating system with three user interfaces – Nokia’s S60, Motorola/Sony Ericsson’s UIQ, and NTT DoCoMo’s MOAP – to create one open mobile-software platform.

Nokia said the whole system will be open source – which means that developers can access its software code free of charge.

“It offers us an opportunity to innovate faster on a bigger, united, more widely accepted platform,” Mr Oistamo said. “It also enables us to deliver new products, we believe, faster to the market. I’m convinced we will sell more products.”

The news is likely to please departing Vodafone chief executive Arun Sarin, who has consistently told the industry to streamline the number of mobile handset operating systems so as to encourage the development of new software applications.

Vodafone has emerged as one of the members of the new Symbian Foundation, which includes mobile networks AT&T and NTT DoCoMo and chip makers Texas Instruments and STMicroelectronics.

Symbian’s closest rival is Microsoft’s Windows Mobile operating system, which has just 13pc of the market.

Microsoft charges handset makers $8 to $15 per phone, according to research firm Strategy Analytics, while Symbian charges on average $4.10. Under Nokia’s ownership, Symbian will come free.

“This puts a lot of pressure on Microsoft right at a time when they are trying to really push into the consumer space,” said Gartner analyst Carolina Milanesi.

“Lower price points are what operators and the market need to push smartphone adoption and dropping royalty is going to help that. For operators this offers a good alternative to Android.”

Google is hoping that Android will allow it to generate more revenue from internet advertising as more people access the web on their phones.

Last year, Google announced an alliance of 30 partners who would co-operate on a handset designed to allow owners much greater control over the device.

However, it emerged this week that the so-called “Gphone” – a new handset powered by the search giant’s software – is unlikely to appear until the end of the year.

“By creating an open-source software platform, Nokia has taken the fight to Google and will leverage its existing clout in the market to isolate Google,” said Emeka Obiodu, telecoms analyst at Global Insight.

“Given the combination of delays, uncertainties about evolutionary path, and Nokia’s latest initiative, Google’s game plan is fatally derailed and will struggle to gain traction in the market.”

Nokia, which makes 40pc of all phones sold globally, will pay €264m (£209m) to buy the remaining 52pc of Symbian shares it does not own.

Sony Ericsson, Ericsson, Panasonic and Siemens have accepted the offer, and Nokia said it also expects Samsung Electronics to accept.

As Nokia’s market share is much larger than 48pc among all Symbian phones sold, it has been paying more to its partners in Symbian in royalties on the phones it makes than it has been getting from the company.

Nokia said it expects the deal to be completed by the end of this year, and to weigh on earnings in 2009. Nokia expects the acquisition to reach break even in 2010, and boost earnings in 2011.

On Tuesday the company introduced Lively, an online tool that allows people to embody a cartoonish online avatar and have text-based conversations with friends and other Internet users in virtual chat rooms. The rooms can be added to any blog or Web site.

Google unveiled the new product in a post on its official blog – its characteristically understated way of introducing new features to the world. It can be reached at www.lively.com, but it is officially part of Google Labs, an area of the company’s site where it showcases projects that remain in the beta, or experimental, phase.

Lively and similar products from other companies have the potential to change the way people interact over the Web. Online chat rooms are two-dimensional – they include text, and sometimes voice and video.

Lively tries to make that conversation three-dimensional, more interactive and more fun. As if they were playing a game, users choose from a selection of unrealistically handsome or Disneyesque avatars.

They can also create their own chat rooms, which can be posted to a blog or social network profile as easily as a YouTube video.

Up to 20 people can occupy a room and chat with one another. (Text appears as cartoon-style bubbles atop the avatars.) Users can design their own virtual environments, hanging on the walls videos from YouTube and photos from Picasa, Google’s photo service, as if they were pieces of art.

Inside Google, the product was headed by Niniane Wang, an engineering manager. Students at the University of Arizona have been testing Lively for several months.

Wang wrote in the blog post that she developed Lively as a “20 percent project,” referring to Google’s philosophy that employees should spend one day a week working on projects outside of their day-to-day responsibilities.

Her spare time could cause some problems for companies with similar ideas. Second Life, the virtual world run by Linden Labs of San Francisco, is known for its much larger virtual world, where hundreds of thousands of users can enter at the same time. But it is accessible through a separate program, not a Web browser. (Lively, which works only on Windows computers for now, requires the downloading of a bit of add-on software.)

Mark Kingdon, chief executive of Linden Labs, said Second Life’s value was not just in 3-D chat but also in more elaborate environments where people can work, play, teach, and buy and sell virtual products.

“Users are highly motivated to create and transact in Second Life to the tune of almost a million dollars a day in user-to-user transactions,” Kingdon said.

Vivaty, a virtual-world start-up in Menlo Park, California, backed by the blue-chip venture capital firm Kleiner Perkins Caufield & Byers, opened its virtual doors on Tuesday. Vivaty’s product is a similar 3-D chat room that runs on Facebook and through AOL Instant Messenger.

In one version now available on Facebook, users can create a virtual dorm room and decorate it with furniture from Target.

Keith McCurdy, Vivaty’s chief executive and a former executive at the game giant Electronic Arts, said Google’s entry was a validation of the concept. He said that Vivaty could get more traction by putting its virtual worlds on every Web site – even those controlled by Google’s rivals.

“We are not beholden to any one camp or approach,” McCurdy said. “We are trying to create an open system where lots of people have branded virtual scenes.”

Google’s success is not assured, of course. Other test products it has introduced have languished, like Product Search, originally known as Froogle

The internet search engine operator admitted economic weakness in the US and Europe was having an impact, while lower-than-expected business sales weighed heavily on the software giant.

Shares in both companies declined sharply after hours in New York, with Google’s equities down as much as 10pc in extended trading while Microsoft’s shares were off by as much as 4pc.

Quarterly results released by the companies last night suggest the technology sector has not been immune from the wider economic woes.

However Google chief executive Eric Schmidt, reporting a second-quarter profit about 2pc below expectations at $1.25bn, said that the company was “very, very well” positioned for an economic slowdown.

Hal Varian, the internet firm’s chief economist, added that “we have a little bit of the Wal-Mart effect going on as times get tough” and cash-strapped consumers began to move online in the hope of finding a bargain.

Google saw a 1pc fall in the number of US users “clicking through” to advertisements on its site in the second quarter compared with the first, and although the figure was 19pc higher than a year ago, that compared with 30pc growth on the same basis in the fourth quarter of last year.

Microsoft’s chief financial officer Chris Liddell said the company was facing a “tough environment”, also labelling the online advertising market as “tough”.

The software company lowered its forecasts for 2009 and reported a fourth-quarter pre-tax profit of $4.3bn, up 41pc, on sales of $15.84bn, up 18pc.

Meanwhile technology services company IBM beat expectations, reporting a second quarter profit up 22pc to $2.77bn as the business strengthens its focus outside the US.

It moved up two places from last year’s poll, beating Microsoft into second place and Mercedes Benz into third.

Google also topped a poll of “superbrands” as judged by professionals earlier this year.

No supermarkets made it into the top 100 superbrands in the survey of 2,200 consumers. It is thought confidence may have been hit by rising food costs.

Among leading supermarkets, Asda dropped 253 places, Tesco 230 and Sainsbury’s 194 places compared to the 2007 survey.

But premium food brands performed better and Marks & Spencer was voted into the top 20.

Stephen Cheliotis, chairman of the Superbrands Council which commissioned the research, said: “Lifestyle brands, particularly those in the technology sector, have considerably more sway with the public than everyday staples such as the supermarkets, which now seem further than ever from the affections of the British people.

“As the spectre of rising food costs continues, they are likely to come under further scrutiny.

“The results are also a further sign that Google is continuing its dominance in the UK. It is clear that Google is the brand that people value at work and in their personal lives.”

The Superbrands Council is a group of marketing, advertising and media experts.

Members compiled a list of more than 1,000 brands according to quality, reliability and distinctiveness and this was then passed on for consumers to rate.

The web addresses I am talking about refer to the numerical Internet protocol (IP) addresses that denote individual devices connected to the Internet. They are unique to every system and are basic for all online communications, from e-mail and web pages to voice chat and streaming video.

Whenever you type the web address of any website, the browser actually search the IP address for that site from a big telephone book, commonly called a “Domain Name Server” (DNS). Say if you type www.google.com your browser will ask DNS the IP address for it and in return 216.239.39.99 will be sent by DNS to your browser. Your browser then heads off to Google’s website using the IP address as a map.

This doomsday can lead to a slower internet speeds and new connections and services (such as Internet phone calling) will either be expensive or simply impossible to obtain. The solution to the shortage is to upgrade to a new address protocol.

The Internet protocols are prepared by the Internet Engineering Task Force (IETF), a large open international community of network designers, operators, vendors, and researchers working for the smooth operation of the Internet. The current IP address scheme, called Internet Protocol Version 4 (Ipv4), was introduced in 1981. At that time there were hardly 500 computers connected to the Internet. The address makers at that time allowed for four billion addresses, thinking they would last forever. But they have been nearly gobbled up in just under 30 years!

But no worries…..as the IETF are already prepared for the doomsday. A replacement system, called IPv6, had been devised as a solution more than a decade ago, providing enough addresses for billions upon billions of devices as well as improving Internet phone and video calls, and possibly even helping to end e-mail spam.

But still the problem doesn’t end with it. It was reported that the new system is not really compatible with the Internet of today. Taking the same example of Google, if it wants to support the new system IPv6, a whole new IPv6 web service will be needed to build, complete with new domain names, servers and bandwidth. The costs run into billions.

The OECD was quoted “immediate costs are associated with deployment of IPv6, whereas many benefits are long-term and depend on a critical mass adopting it”.

You can have a look at the countdown clock for the doomsday at penrose.uk6x.com.

A startup search engine launched Monday, Cuil (pronounced “cool”), hopes to prove that its search technology is cooler than that of the reigning king of search, Google (Nasdaq: GOOG) .

Cuil’s creators — former Google search architect Anna Patterson; her husband Tom Costello, a former researcher and developer at Stanford University and IBM (NYSE: IBM) ; and Russell Power, another former Google executive — claim they have pioneered a new take on the search game, combining the largest index of Web pages — 120 billion — with a content-based relevance methodology.

Search results, organized by ideas, are consequently more meaningful, the company said.

Taking on Google, however, requires more than just a nifty new search engine, said Gene Alvarez, a research vice president at Gartner (NYSE: IT) . Since its launch, Google has expanded its brand to encompass a variety of Web services. Consumers turn to Google for much more than its search engine.

So, while something like Cuil may whittle away at their search market, displacing Google will be an uphill battle.

Cuil Enough?

With a home page sporting a black background and a guarantee of complete user privacy, Cuil appears to be styling itself as the anti-Google. Unlike Google, which keeps an anonymous record of each search conducted by its users, Cuil’s technology relies on a different search methodology, according to its creators.

Rather than returning results ranked by the number of inbound and outbound links of Web pages, as Google does, Cuil’s technology mines data for content-based searches. Results therefore are based on the content of each page, not the popularity of a particular site. It makes Cuil’s search method more efficient and allows the company to not need to collect personal data on searches, it said.

In another contrast, instead of a list of links with brief descriptions, Cuil’s results are laid out in columns, much like a magazine, and separated by subject, which also allows for additional searches by concept or category.

The company has not disclosed its business model, and Cuil representatives did not respond to TechNewsWorld’s request for comment.

Searching for More
Any company seeking to knock Google from its perch atop the search engine world will have to fight long and hard to make it happen. Challengers must answer to Google’s many ancillary Web services as well as its spider web-like ecosystem of business partners.

“Google at this point has not only captured the consumer with its search engine, but its other applications have helped make people comfortable with Google. Whether it’s the add-ons to the browser or using Gmail or Google Apps or the social software, Google’s expanded footprint helps Google fight off these types of attempts,” Alvarez told TechNewsWorld.

For Cuil to be successful, it needs to be able to draw to its site consumers who in the course of an average day have multiple touches with any given Google product. Google’s installed search toolbars, Gmail, Google Docs and other applications all keep users coming back to Google.

“All of that is stuff Cuil is going up against. They have to do one of two [things]: Exceed the quadruple threat, which is quite a challenge in itself, or be able to provide a clearly differentiated search experience from Google,” explained Tom Austin, a Gartner fellow and chief of research in software.

“From a quick look at the site, I didn’t see anything that jumped out at me other than that they changed the white background to black to show it as an opposite to Google. I saw some functionality that looks similar to Ask.com’s attempt to bring in a Web 2.0 rich Internet experience,” he said.

Ask.com’s revamped search efforts — with peeks at Web pages and other added features — were not enough to draw a significant portion of Google’s installed base.

Challenges Ahead
The challenge Cuil faces is much greater than developing a better search engine, Austin said.

“Once upon a time, Google was about search. Today, Google is this extremely large business model that is search-based but is ad revenue-driven and includes hundreds of thousands of other companies in its ecosystem. Anybody who wants to beat Google in search has got to displace the entire business model and business ecosystem Google has built,” he told TechNewsWorld.

“The chance of that happening in the next five years is diminishingly small,” he added.

“If you’re a startup, you’re not competing with Google. You’re competing with all the SEO firms, all the hundreds of thousands of entrepreneurs who are buying Google Adwords and Google’s ability to sell this vast network of available pages on which to advertise,” he explained.

Cuil has to be ready to wage a long and hard battle, much the way Toyota has over the past 50 years with General Motors, Austin noted.

“How many people took on General Motors and won? It’s taken Toyota 50 years, and they are still not No. 1. Anyone taking on Google or Microsoft or any market leader must be prepared for a long fight. And it’s not going to be by directly attacking the strength of the machine, either,” he said.

“They spent a ton of money on this thing and it is natural they want to make a return,” analyst Rob Enderle of Enderle Group in Silicon Valley said.

Google has bided its time working on ways to “monetize” YouTube without alienating notoriously transient Internet users that could easily switch to Hulu, Daily Motion or other rivals in the online video-sharing arena.

“Click-to-buy” links are being discretely placed in control panels below YouTube videos to invite people to visit online shops iTunes or Amazon.com to buy music, books, films or other material related to snippets watched.

“This is just the beginning of building a broad, viable e-commerce platform for users and partners on YouTube,” said a message on the website.

“Our vision is to help partners across all industries offer useful and relevant products to a large, yet targeted audience, and generate additional revenue from their content on YouTube beyond the advertising we serve against their videos.”

Links to online stores are making a U.S. debut on videos of EMI Music artists and of the Spore computer game recently released by Electronic Arts.