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Yahoo's Year, Twitter's Triumph & the Social Whirl

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While Microsoft, Yahoo and Google were dancing around each other all year, angling to grab, protect or even expand their share of the search market, social networking kept rising as the dominant force on the Web in 2008.

Perhaps none rose as fast as Twitter, which became a kind of Haiku generator for micro-bloggers with its 140 character limit on messages. In this installment of our ongoing series of stories of the year, InternetNews.com rounds up the key developments in Web-based media this year.

The Microsoft Yahoo Push Pull Dance

Microsoft shocked the industry in 2008 with its plan to buy Yahoo. CEO Jerry Yang was all over the idea, claiming it was the best thing Microsoft could do.

Oh, wait. That was months after Yang and Yahoo's board rejected the $44.6 billion offer from Microsoft CEO Steve Ballmer. Later, with Yahoo's stock sinking lower than it's been in years, Microsoft's billions suddenly didn't look so shabby.

Too late. Ballmer said Microsoft's moved on. As a consolation prize, the software giant scooped up semantic search company Powerset.

All in all, it's been a tumultuous year for Yahoo. Desperate to remain independent and facing an ultimatum from its would-be acquirer, Yahoo (NASDAQ: YHOO) found a waiting partner in rival Google, avowed nemesis of Microsoft.

In April, the two companies conducted a two-week trial that saw Yahoo use Google's ads next to a portion of its search queries. Microsoft was steamed, warning that the search-advertising market would become a certain monopoly if the No. 1 and No. 2 players joined forces.

The partnership ended, and as spring gave way to summer, Yahoo found itself in an increasingly precarious position. Shareholder lawsuits charging the board with breaching its fiduciary duty piled up, and activist investor -- or corporate raider, if you prefer -- Carl Icahn began amassing a sizable stake in the company.

Icahn threatened a proxy war to oust the board and force a sale to Microsoft. Yahoo eventually settled with Icahn in July, giving him and two hand-picked directors a seat on the board, but by that time the damage was done.

Microsoft still says it's interested in buying Yahoo's search business, but Yang and company are on record as saying they don't want to part with such a major component of the company's business.

Stay tuned, the drama will continue in 2009 as Yang has volunteered to step down as CEO as soon as a new one is found to replace him. Perhaps a new CEO will have better luck doing a deal with Microsoft or pulling off the much rumored deal to buy AOL.

Searching For New Searches

With its closest rival in search, Yahoo, distracted by Microsoft's entreaties, Google (NASDAQ: GOOG) chugged along, expanding its massive lead in the search market over both rivals even further.

The search giant was also unfazed by several other would be challengers. The highest profile one was Cuil, started by former Google execs. But Cuil (pronounced 'cool') got off to a shaky start with technical problems tainting search results. The company initially garnered terrific publicity in many news outlets for its new approach to exposing more of Web's content, but the blogosphere and others quickly pilloried Cuil for its glitches. With its technical problems solved, it remains to be seen if Cuil will be a long-term player.

Another big announcement in search was Yahoo's release of Build Your Own Search Service (BOSS), which essentially makes the company's search infrastructure available to others (such as Hakia, a natural language search engine) to build upon. This coming year will be a good measure of whether BOSS was a good bet by Yahoo.

Google also continued its push into the enterprise, but there it's the upstart competitor. Microsoft paid $1.2 billion at the start of 2008 to buy Fast Search & Transfer, one of several leading enterprise search players like Autonomy, Exalead and others.

Next page: Semantic search on the rise