Powerset, the startup founded in 2005 with the objective of challenging Google with the development of an improved search engine, made its official launch to the public today.

As we anticipated last February, Powerset’s search engine, which uses “natural language” to organize and search documents, will initially only index content from Wikipedia.

Powerset created an index of Wikipedia by studying the meaning of entire sentences rather than the relationship between words. Users will be able to type language queries in the form of a question instead of conventional keyword searches and quickly obtain information from many different sources.

Microsoft has officially withdrawn its bid to acquire Yahoo in a letter that Microsoft’s CEO Steve Ballmer sent today to Yahoo’s Jerry Yang.

In a final meeting that took place today between Jerry Yang and David Filo from Yahoo and Steve Ballmer and Steve Johnson from Microsoft, Yahoo stated that the lowest price they would accept was $37 per share and Microsoft reported that they would not go over $33 a share. The offer was withdrawn shortly after during a phone call conversation between the CEOs.

Letter from Steve Ballmer to Jerry Yang:

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

— First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

— Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

— In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

— This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favour of Google.

— It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,
/s/ Steven A. Ballmer

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

Press Release:

REDMOND, Wash., May 3 — Microsoft Corp. (Nasdaq: MSFT) today announced that it has withdrawn its proposal to acquire Yahoo! Inc. (Nasdaq: YHOO).

“We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole. Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees,” said Steve Ballmer, chief executive officer of Microsoft.

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” said Ballmer.

“We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo! would have accelerated our strategy, I am confident that we can continue to move forward toward our goals,” Ballmer said.

“We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships,” said Kevin Johnson, Microsoft president for platforms and services.

Jaxtr, a social communications startup that let users link their phones to the web, is now providing a service that allows sending free SMS internationally, without restrictions, whether or not the recipient is a Jaxtr member.

Recipients can reply directly with their cell phones, or click on a link, sign up to Jaxtr and send a free reply through their cell phone’s Web browser.

The service allows text-messaging directly from the member’s home page to cell phones in 38 countries. Jaxtr’s basic membership is free and includes access to the new international SMS service.

Jaxtr’s new service is ad-supported although they plan to incorporate a premium service for a fee in the future.

Yahoo has announced a partnership with rival Google to start testing Google-generated ads in its website during a period of two weeks. A starting date was not specified.

The test will involve placing Google search ads to about 3% of the queries made in the U.S. through Yahoo’s search engine. After the two-week trial, Yahoo will evaluate whether it generates more revenue by outsourcing ads from Google or through its own ad sales system.

Yahoo’s move is clearly an attempt to show Microsoft that it has other options besides taking its initial bid of $42 billion (or $31a share). Over the weekend, Microsoft set a three-week deadline for Yahoo to begin negotiations, a demand Yahoo declined by restating its contention the offer undervalues the company.

Microsoft fired back saying that a deal between Yahoo and Google would make the search market less competitive.

Indeed, according to ComScore’s MediaMetrix data, Yahoo’s market share continues to drop and accounts to 21.6% in February. In the same way, Microsoft’s share is also down to 9.6% for the month of February. In the meantime, Google’s share has grown to 59.2% for the same time period. If a Google-Yahoo alliance occurred, it would represent a total of about 81% of the total search market.

Yahoo said it would add new voice-enabled features to its mobile platform to make Web search easier to cellphone users.

The new OneSearch 2.0 technology will let consumers use voice commands for search services beyond current mobile voice recognition systems. The service will allow wider searches for locations, restaurants, flight information, Web sites, news or local listings.

Yahoo mobile voice searches may take as little as five seconds to recognize the search and to return the results to the device on conventional networks and from 10 to 20 seconds on slower networks.Yahoo plans to introduce the service on 500 different devices and international markets by the end of the year. Consumers will be able to download OneSearch at m.yahoo.com/voice.The company, which predicts there will be more than 40 times more mobile devices than PCs by 2010, expects to monetize OneSearch and other mobile services such as instant messaging or e-mail through advertising.

Amazon has launched a new service that allows shoppers to compare prices and buy products on their cellphones via text-messaging.

The service, called TextBuyIt, is designed to let users text the name of a product, its description, its UPC or its ISBN to “Amazon” (262966 on the keypad) and then returning matching items as well as prices. Buyers can instantly purchase their selection by texting back the single-digit identification number next to desired item. Amazon then calls to confirm the order and walk the customer through the checkout process.

Amazon will be facing competitors such as mShopper, which launched a similar mobile shopping service in 2007.

Hulu, the long-awaited online video joint venture between NBC and Fox, went live today offering hundreds of free TV shows and movies to anyone on the Internet.

The site displays ad-supported films from NBC, Fox as well as over 50 media companies including Sony Pictures, Warner Bros. and MGM.

Hulu’s ambitious and never-ending mission is to help you find and enjoy the world’s premium content when, where and how you want it. We hope to provide you with the web’s most comprehensive selection from more than 50 content providers including FOX, NBC, MGM, Sony Pictures Television, Warner Bros., Lionsgate, and more to deliver premium programming across all genres and formats, television shows, feature films, and clips. Watch full-length episodes of current primetime TV shows such as The Simpsons and The Office the morning after they air, classics like Miami Vice and Buffy the Vampire Slayer, and clips from Saturday Night Live, Nip/Tuck, and others. Hulu also offers full-length feature films like The Usual Suspects, Ice Age, Three Amigos!, and The Big Lebowski as well as clips from films such as Napoleon Dynamite, The 40 Year Old Virgin, Devil Wears Prada and many more. Hulu is free and ad-supported — available anytime in the U.S. [Hulu]

Hulu has been in beta version since October but has been slowly inviting users to join the site. Unlike competitor YouTube, Hulu offers high-quality professional video content which, presumably, will be more attractive to advertisers.

Currently, Hulu is running traditional 30-second ads in the long-form video. However, for certain shows the company expects to let users choose from an array of commercials in advance of a video choice. Some viewers will also be given the opportunity to watch a two-minute film preview before a TV show, and then skip all the other advertising breaks. Because viewers choose the ads they want to see, they will potentially have more interest in the products being advertised.

Hulu’s implementation of new advertising formats in combination with rich high-quality content could be the alternative major marketers have been waiting for.

Powerset is building a consumer search engine based on natural language processing.

Unlike other conventional search engines that index keywords, Powerset claims to do a deep linguistic analysis on every sentence it reads.

Powerset extracts and indexes facts about every sentence in every page, making its index the first truly robust semantic index of the web. Powerset will offer a transformative search experience, with better, more relevant results. Powerlabs is an online community that will contribute to the development of Powerset and allow the company a direct line of communication with consumers to better understand the potential, possibilities, and challenges of building a large-scale search engine. [Powerset]

Using Powerset’s semantic search engine, a user could ask, “When did earthquakes hit San Francisco? ” and potentially get more on-point search results than from typing in mere keywords such as “San Francisco earthquakes.” Another advantage of the Powerset approach is that it gets to the meaning of words, so queries for one word will fetch results that contain words which are synonyms.

The project is backed by a team comprised by industry leaders from companies such as Altavista, Apple, Ask.com, BBN, Digital, IDEO, IBM, Microsoft, NASA, PARC, Promptu, SRI, Tellme, Whizbang! Labs, and Yahoo!.

For now, Powerset’s is currently under development. The search engine is testing the system based only on Wikipedia content before they go for the huge expense of indexing the entire Web.

ooVoo, a videoconferencing and Instant Messaging startup, has launched a new VoIP phone service that allows users to make free phone calls from a computer to any landline or mobile phone in the US and Canada.

ooVoo provides a high-quality video communication service that delivers a more meaningful way for people to call and connect over the Internet. ooVoo’s technology enables people to experience a face-to-face conversation and share a full range of emotions as if they are in the same room together, whether they are across the street or across the globe from each other. ooVoo’s superior quality video and audio is available to anyone with a computer, broadband connection and a web camera, for real-time video calls with up to six friends, relatives and colleagues simultaneously. ooVoo’s high quality video chat service includes video conversation recording, telephony, video messaging, instant message chat and file sharing amongst other capabilities. [ooVoo]

Unlike competitor Skype, ooVoo does not use a P2P network. The company offers a wide range of capabilities such as face-to-face conversation with up to six people, video stream recording, file transfer, in-call video effects and chat.

Sony has partnered with Skype to enable users of its latest slim PlayStation Portable (PSP-2000) to make free calls around the world through the Internet.

By introducing Skype on PSP, the following features and services will be made available to PSP users:

• Free voice calls between Skype users
• Skype contact list management (view existing contacts, add new ones)
• Skype presence (see which friends are online and available to talk)
• SkypeOut™ calls to make calls to landlines and mobile phones anywhere in the world (requires the purchase of Skype credit)
• Optional SkypeIn™ number that lets users receive calls on Skype from landlines and mobiles anywhere in the world (requires the purchase of Skype credit)
• View and modify Skype settings and account details (including username creation, SkypeOut settings, voicemail settings and call forwarding) [Sony Pressroom]

PSP users worldwide will be able to start using Skype features and services through a simple system software update scheduled in late January. After updating the PSP system software, a Skype icon will be added to the Network category in the home menu. PSP users who do not yet have a Skype username can register by clicking the icon and following the instructions. PSP users who already have a Skype username can immediately sign in by clicking the Skype icon and entering their username and password.