OK. Did Microsoft just absorb Yahoo for zero additional cost beyond its oft-stated plans to spend some 10-15% of its budget on search per year? Did Apple really stifle innovation with its carrier-friendly App Store rules? And what’s common to both companies’ developer strategies? Yes, no, a lot.

Working backwards, Apple and Microsoft offer their developer communities their favorite incentive — money. Seven million .Net developers come out of the Yahoo deal stronger than ever, with very few public comments from Yahooers hoping to move over to Microsoft like the ones that drowned out the proposed buyout phase of this deal. Back then, it was all about the complexity of integration of the Valley stack with .Net, and how ridiculous it was to think Yahoo engineers would work for or even with the Redmond crowd.

But the Yahoo deal was never about Microsoft. It was about Google cleaning Yahoo’s clock, leaving it vulnerable to the takeover that’s been happening in slow motion ever since. The original deal was tied to a timetable designed to clear the Bush administration before it left office, and no one seemed to recognize how serious Ballmer was when that deadline expired. Given the trouble Google had with its subsequent deal with Yahoo, you might have a little more respect for Ballmer’s counting of the cards in the first phase. Now, with Google out of the antitrust argument and in effect validating the rationale for the new deal, Ballmer is sitting pretty.

With Yahoo out of the search business, a two-horse race provides incentive for an attack on Google’s realtime challenges. It’s not so much that they don’t understand the stakes, but as with Google’s undercutting of Microsoft revenue streams, Microsoft doesn’t have to defeat Google in order to profit from a healthier competition for the efficiency of click-throughs. Just as television advertising is distributed across a four-network market regardless of NBC’s or CBS’s current status, so too will efficient results work across a 70-30 split. What does make a difference are the Web properties that house the ads, and that’s where social media and its follow clouds can make a big difference.

Here’s where the comparison with Apple and its developer cloud begins to resonate. Every time we hear the outrage of an unfairly damaged App Store victim, our first inclination is to think there’s some fundamental flaw in the relationship between Apple and its third party developers. The argument: Apple’s arbitrary limits are designed to protect AT&T from applications that subvert their revenue model, and/or Apple from losing its leverage obtained through the exclusive deal. It’s a complex series of checks and balances — subsidized device prices to spur dominant market share, all-you-can-eat access, and the use of onboard WiFi to keep the pressure on for further concessions.

The best comparison is one with Twitter and its third parties — rate limits and shifting favoritism with developers based on allegiance for a few select winners. The models cross over with Tweetie, which not only enriched its developer and investors but established a poster child for how to play ball and win in both the iPhone and social cloud spaces. Contrast that with the unhappy video developers who tread too close to the firewall between excessive 3G saturation and the more constrained 3GS upload model, and most developers will overlook the losers and dream of hitting the App Store lottery. It’s not really a matter of rules but rather timing: what won’t work today inevitably will work at some point when bandwidth can survive the new usage pattern.

So the answer to App Store rate limiting stifling developers is no, and it points a way to the Microsoft opportunity that grows out of the slow-rolling Yahoo dismantling. With Bartz focusing on high value media plays, .Net and Yahoo transplant developers will start looking for an iPhone-like platform to get comfortable with in the horse race with Google. That platform is Silverlight, which offers advanced realtime rich media features coupled with access to the Microsoft advertising platform. Interestingly, Silverlight and the iPhone share some powerful characteristics — H.264 support, on and offline application models, and streaming deployment of both media and application update code tied to an iterative transactive micropayments fabric. And the keyword: money.

Google, on the other hand, will be watched carefully as it attempts to hurdle the application barrier Apple is defining with the Google Voice slapdown, as well as deal with the difficulty of integrating Google Wave with its apps or vice versa. At some point, Microsoft will have to decide how long they can protect their enterprise control of Office at the cost of losing the global consumer market of the next generation. They may realize a Silverlight socially aware Office for the consumer space (netbooks, XBox, and down into Windows Mobile) can jumpstart a Silverlight App Store before Google has a chance to react. Selling that for a bargain price (free) to the Yahoo crowd will look like the next logical step in the Yahoo takeover, and make the increasingly sweeter pill a lot easier to swallow.

IBM has announced two strategic moves today with the acquisitions of Ounce Labs and SPSS Inc. Terms of the former deal were not disclosed, while the latter is expected to close at approximately $1.2 billion.

Ounce Labs develops source code scanning software designed to identify system vulnerabilities throughout the software development cycle. The idea is that by integrating security analysis into the development process, vulnerabilities can be located and addressed before a product goes live. IBM will integrate Ounce Labs into its Rational family of Web security applications, likely with hopes that additional security measures will make customers feel more comfortable working with applications in the cloud.

SPSS, on the other hand, is a provider of predictive analytics software. The deal is IBM’s second acquisition in the information on demand space following Cognos Inc in 2007, and comes nearly two years after IBM announced it was working alongside SPSS to deliver analytics capabilities within IBM DB2. The move will substantially beef up IBM’s business analytics offering, and place the company in better position to compete with SAP, which currently commands 33% of the market.

With the deals IBM continues the trend of acquiring companies at an astounding pace, and given recent acquisition activity from Oracle and Intel, the enterprise acquisition market is showing signs of life. It will be interesting to see if the ailing economy has wielded its worst, or if we are merely passing through the eye of the storm.

Last night we sat in on a conference hosted by the Churchill Club at Microsoft’s Silicon Valley campus titled “The Free Economy: How Companies Make Money From Giving Things Away.” Headed by Chris Anderson, current Editor-in-Chief at Wired Magazine, the panel set out to discuss the evolution of business models centered around free Web services. In addition to Anderson, the panel featured five entrepreneurs, each with significant experience leveraging the “free” business model in a specific industry. Names and companies represented in the panel are listed here.

The conference was intended to promote Anderson’s new book, Free: the Future of a Radical Price, in which he explores business models and marketing techniques utilizing free services and giveaways as a profit generating strategy. To demonstrate the concept, Anderson gives the example of authoring a book and distributing it free of cost. By facilitating the distribution of the book the author could quickly develop a large following, and eventually cash in on conferences, teaching, consulting gigs, etc. The book has been the subject of some criticism, primarily surrounding Anderson’s point that the free model represents the dawn of a new type of economy, but overall many have described it as an insightful look into a different approach to running a business.

The conference itself consisted largely of Anderson juxtaposing the insights of the panel to reveal some of the more nuanced approaches to building a business around free Web services. The consensus seemed to be that the “freemium” approach is the most recent manifestation of the “free” paradigm, and the panelists went into detail explaining exactly how they leveraged this model in their respective industry.

As a whole the process was fairly similar in each case – build a service in which the derived value becomes increasingly evident over time, creating a situation where any reasonably priced premium becomes trivial. Definitely not an earth shattering conclusion, but the way in which some of the panelists capitalized upon the value they created was quite interesting.

Ranjith Kumaran of YouSendIt, for instance, provided a particularly detailed look into how YouSendIt took off in the enterprise. The story seemed noteworthy given the general stigma surrounding free Web-based services in large organizations. Ranjith described how YouSendIt was able to get around this stigma by emphasizing a view of the consumer as a professional, with a preference for a professional user experience. That means no background advertisements, no gimmicky features to artificially produce virality, etc. His rational was that busy people want to be productive, and want products that are easy to use at home and at work. By creating a free Web service that appealed to individuals with a professional agenda, YouSendIt saw grassroots adoption of their service within organizations, which, in many cases, evolved into something that management could not ignore.

Of course YouSendIt is a special case, as the service was not initially intended for business use, but the story sheds some insight into how small Web services can circumvent some of the daunting barriers to entry that exist in the enterprise space. A similar account was given for several industries, from video games to social networks to the music industry.

Anderson’s book will likely include the insights of the panelists, and accordingly, all forms aside from the hard cover will be available free of charge.

Sandwiched neatly between the RealTime is God and RealTime Who Needs It crowds is a new group that embraces both positions while moving forward rapidly. These folks include Brett Slatkin of the PubSubHubub effort and Dave Winer of rssCloud.org. Slatkin and fellow conspirator Brad Fitzpatrick demoed the PSHBB architecture at the RealTime Stream Crunchup, and Winer quickly jumped in with his own implementation.

While Winer attacked PSHBB as a Google (and TechCrunch) conspiracy, the rhetoric seemed mostly in service of his own plans for a decentralized open platform not controlled by bigcos. The charges don’t make sense — PSHBB is not a Google effort but rather one started by Fitzpatrick and Slatkin on their own — and like Winer’s, proposed and delivered as an open architecture that can be spread across multiple players. In other words, they’re saying the same thing.

Digging deeper, it could be that Winer’s concern is that adoption by Google or other platform players will create a bandwagon effect that could lock out smaller independent developers. There’s certainly some truth to that dynamic, as PSHBB is already running in a number of cooperating platform implementations including FeedBurner, WordPress, and even FriendFeed, where Slatkin is active in tracking user issues. But ironically, by offering a competing framework, Winer takes away the argument of unfairness. If developers and publishers want to adopt one platform over another because it’s got more mainstream adoption, they’re free to do so. In the past, Winer has been the beneficiary of just such choices, with RSS 2.0 proliferating in no small part due to support from Microsoft on the platform side and the New York Times on the publishing side.

Both PSHBB and rssCloud sidestep the issue of whether RSS is on the decline, preferring to co-opt whatever momentum the technology has into the swarming viral nature of the realtime micromessaging disruption. Whether there’s consensus about the underlying value of the new platform, there’s no denying the uptake and attendant opportunities for gaining mind and perhaps market share of the new wave of approaches to managing the stream. If that were not the case, why would PSHBB be gaining adoption and Winer be spending time on his own cloud? Our own experience in managing the CrunchUp suggests an explosive market for startups; we spent most of the last few weeks trying to fit people into panels and demos that had already expanded to the breaking point.

If realtime is simply the latest buzzword, a placeholder for getting attention and perhaps venture money until the next buzzword comes along, then we’d expect to see some slowdown in those realtime projects that are out at the bleeding edge. Facebook certainly seems to have stopped short of a realtime updating stream, though I’m seeing more Facebook messages appearing in aggregate tools such as Seesmic and FriendFeed. But mostly I’ve seen complaints about intermittent slow updating from Twitter and an apparent move to a one-hour pinging of new WordPress items in the latest update. In other words, speed wins even if no one has yet figured out how to manage that speed efficiently.

Then there’s WiFi on planes, where I bet we’ll soon see numbers reflecting the impact on what airlines we choose. If realtime is now the new normal in publishing, then losing a working day to a cross-country flight is no longer viable. With price discounts for mobile access, the *Phone becomes the easy way to keep in touch with short, bursty messages the simplest way of managing the infostream. And the fundamental result: the URL payload becomes the lingua franca of the message bus.

It’s here where the damage is being done to RSS as a transport. As micromessage citation grows in importance, the sheer number of Web pages cited begins to overwhelm the RSS payloads. In recent days, Google Reader Likes have been added in an attempt to map some sort of social graph to the consumption of RSS items, but it’s still unreachable except from within the Reader UI. The trend moves away from RSS items and toward the original pages, which for publishers means a much greater opportunity for cross-linking, advertising, engagement, and analytics.

Podcasting is similarly disemboweled, given the ease with which YouTube videos are streamed to all always-on devices. It’s easy to decry Google market force here, but it’s no accident that Microsoft’s IIS Media Server now supports H.264 as does Silverlight cross-platform. I believe Silverlight becomes the default NetBook media server, based not on enclosures but rather streaming. We’re already seeing popular podcasts such as Leo Laporte’s TWiT gaining large realtime audiences as the number of streaming services proliferates. It’s only partially random that Twitter emerged out of the ashes of a podcasting service.

One argument against this future is that it tends to rely on centralized storage and a gated cloud of services. Winer personalizes this to the notion of TwitterCorp, that no single company should control this uber stream, that they won’t be able to, that if they could it would be a bad thing. He has a point, but whether rssCloud will solve this problem is not clear. He’s using Amazon EC2 and the open source Identica project for parts of his platform, both services provided by commercial companies.

In his rssCloud Roadmap, Winer asks us to think of rssCloud as Loosely coupled 140-character networks, and his goal “to instantaneously flow 140-character messages around, with metadata, including links, tags, enclosures, and whatever else (it’s as open architecture as RSS 2.0 is).” I’ll quote with interleaved commentary:

A network that works alongside Twitter, but outside the control of a company. You can be confident that no company will control it because it is being started by a person, not a company. Even if I wanted to crush you, I couldn’t. Even if I wanted to control all the users’ data, I can’t — since most of it won’t flow through my servers.

I’m not convinced there is much of a distinction between services offered by an individual or a company; they both can be “controlled” to the extent that users offer their data up. Perhaps the caveat of “most” lessens that control but to that extent the remainder of the data flowing through Winer’s servers would be the sum of his control.

Re Google’s PubSubHubBub, their goal appears to flow updates of blog posts in association with Feedburner. This is a good goal. I hope to help them get RSS compatibility into it. If your goal is to optimize the polling of existing RSS or Atom feeds, you can use the rssCloud network, but that’s not something I want to get involved in personally. My interested is in the micro-blogging application, at least at the outset.

Again, characterizing PubSubHubBub as “Google’s” is inaccurate. He offers to help provide RSS compatibility, and suggests that while rssCLoud can be used to optimize polling of RSS feeds, he’s personally only interested in the micro-blogging application for now. He’s surely threading the needle here, but how that will help spread adoption of his solution depends on the degree to which his solution appears more open and counter to the TwitterCorp threat he sees.

As with RSS, it is always a mistake to underestimate the power Winer’s bearhugging of technology can muster. But the context in which RSS emerged has as many differences as similarities with today’s circumstances. In particular, RSS was supported by two kinds of media — the emerging blogosphere and, eventually, the mainstream media. Today, these two medias have merged, primarily as a result of RSS and its democratic impact. It’s as though the New York State Thruway suddenly smashed all of its toll booths and allowed free travel. The impact was seismic, like the Guttenberg press. Shelf space became infinite.

That revolution took time and luck and plenty of political pressure to gain enough momentum. By contrast, Twitter bootstrapped RSS, broadband, social dynamics, and the combined medias. What took several years with RSS has taken a fraction of that time precisely because RSS proved you could tip markets without the dominance of bigcos. In effect, RSS proved we don’t need to fear the locked trunk, at least not in the classical way it’s been defined. How do we defend ourselves against bigcos like Google and Microsoft from using RSS tactics themselves?

At the Fortune conference in Pasadena today, Michael Arrington reported Twitter’s Biz Stone responding to a question about Discovery as saying “they need to assign weight to users or specific Tweets to do a better job of surfacing Tweets.” Inherent in the comment are the tools of control: “assign weight” and “surfacing Tweets.” These words imply ownership of the stream, just as Page Rank became the control point of authority in the search era.

Here’s Ray Ozzie on the same point:

I think it’s going to impact search, because the nature of search ranking is based on — at least classically is based on looking at what’s relevant by what it’s linked to, and if a lot of the links are moving from more static media into more dynamic media —

Me: Oh, so you agree with my thesis.

Ozzie: Yeah.

Me: Excellent.

Ozzie: Yeah. I don’t know to what degree the ranking will be impacted in that realm, but I think that’s a fairly important thing. And the Tweet itself is more or less the anchor text of the link and so on.

But wait, here’s Microsoft talking about how disruptive the stream will be, and it’s a littleco talking about controlling the high ground. Can Twitter establish control of the message stream to the point where no other stream can produce efficient filtered results to users? Again, Ozzie:

[W]hat I learned in the Groove experience is that if you have lots of things that notify things, the user wants to suddenly aggregate them and tune which ones they want high bandwidth instant notification and which ones they only want to occur every once in a while. So, having messages go through something where they can say, okay, I’m going to have all of these different classes of messages, move these classes into this bucket, these into this bucket, notify these on my phone, these somewhere else, it’s useful for the user….

[A]s humans we have these issues. And certain of the events, certain classes of the events we want to treat, as Dave [Winer] says, like a river where you don’t really care if you miss something. It’s where you’re not trying to keep up every little thing. Maybe it’s an amusement, maybe it’s just a background activity.

Some types of events you just want to see them. You just don’t want to miss even a single one in this big flood of notifications. And so we just need better tools.

It stands to reason that the more endpoints, the better the chance of no single company controlling the stream. Today Twitter talks like a bigco, but in a world of streams, they must compete on the quality of their discovery model, compete on how they “assign weight,” compete on how they “surface Tweets” to their cloud of third party clients and analytic engines.

Viewed in this context, PSHBB promises to bring Feedburner feeds, Google Reader shares and Likes, and various smaller RSS clouds such as WordPress up to speed and into the weighting and surfacing game. The coalition also benefits from bridges to services such as FriendFeed that Winer has eschewed because they have offered solutions such as SUP. rssCloud certainly serves as a reminder of the underlying values of simplicity, transparency, developer independence, and user control, but then again that’s what PubSubHubBub is selling too.

Today Oracle announced the acquisition of GoldenGate Software, a provider of real-time data integration solutions. Terms of the deal were not disclosed.

According to GoldenGate’s website the company offers “real-time data integration … that empower(s) IT organizations to deliver continuous access to real-time information.” Oracle states this technology will enhance its ability to pull and synchronize data from multiple, disparate sources.

The deal reflects reflects a rising interest in real-time data integration technology. When operating continuously around the clock on a worldwide scale it becomes increasingly difficult for large corporations to ensure continuity in business operations. Data must be synchronized between disparate, heterogeneous systems, and companies must be able to maintain uptime during migrations and system upgrades. IBM acquired data integrators Ascential Software and DWL in 2005 to address a similar problem.

Oracle and GoldenGate have operated as partners for the last 10 years, and the company’s technology is already integrated into several Oracle products. GoldenGate will continue to operate independently until the deal’s expected close later this year.

The data from the Apple earnings call illustrates the difficult time RSS will have staving off micromessaging. Most telling was the turf the iPhone took out of iPod sales. Every one of those iPhone sales, no matter whether they are the new 3GS or the $100 3G model, reduce the reasons for syncing to a Windows or Mac box in order to bring down podcasts.

As realtime accelerates, streaming text and media services are much easier to leverage than slower ones such as RSS readers. Given the Flash blockade on the iPhone and Google’s YouTube support for H.264, those services that make it easier to click directly on breaking news are rising in usage. At its simplest level, if I see a Flash icon, I avoid that service more and more. If I see a YouTube icon, I come back more and more, whether it’s on the iPhone or not.

YouTube’s branding puts a lot of wood behind the realtime arrow as a result. iPhone access via iTunes is gated at 10MB on 3G, so ironically it underlines the streaming angle if you doubleclick the item again and the file begins streaming to you in realtime. Gradually users are being trained that if you want to hear something when you become aware of it, it better be hosted in MP3 or on YouTube. The iPod’s lack of a radio may not be the determinant in iPhone growth at its expense, but the outcome is still moving away from downloading and toward streaming.

What may be more fundamental even than speed is the two-way interactive nature of the realtime experience. FriendFeed conversations have a certain dynamism missing from Twitter calls and responses. While it may not be obvious today, when FriendFeed streams aggregate both Track and your Follow cloud, the resulting service can signal you when triggers are fired and you can respond accordingly. Streaming media has a similar capability, where your actions around the media can be transmitted back to the Follow/Track engine in realtime.

Those composite signals contain much more fidelity and metadata than previous elements of the stream, and like H.264 will create swarms around both content and production of the parent streams. In effect, the immediacy and feedback loops of these realtime streams will provide increased value that will accelerate the clients that enable them. Desktop systems that play along will achieve momentum as well. Flash will suffer, Silverlight will not. It’s the beginnings of a Betamax/VHS argument, and we know how that turned out.

Now more than ever people are turning to the Internet for products and services they want to buy locally. Recent research from ComScore reveals that 66% of Americans use online search to locate local businesses and services, and 61% of local searches result in purchases either on or offline.

Even at casual glance such numbers scream the importance of local search to small business owners, and Utah-based OrangeSoda has seen success helping small companies fully harness the power of the communication channel.

Specifically, OrangeSoda provides a search engine marketing platform designed to help small to medium sized businesses increase visibility locally through geo-targeted online marketing. The company takes a more holistic approach to search marketing than most, managing paid listings, organic results, and local business listings at the top of results pages (often referred to as the Google 10-pack). The latter offering, officially announced today, constitutes the company’s most recent addition to its service package.

Local SEO is a whole different ball game than traditional SEO. Client budgets are smaller, making it crucial for service providers to have a strategy that works the first time rather than relying on a drawn out trial and error process. It is also vital that service providers discover methods for generating conversions with individual keywords that often don’t have massive search volume. Two notable players in the local space are Yodle and ReachLocal, who focus primarily of paid search optimization.

Though a slightly more precise science than large scale search marketing and SEO, local search optimization is still an emerging craft. However, there is conceivably greater potential in the local sphere, as searching with a local identifier more directly reveals intentions of making a purchase. The space has received considerable funding, with Yodle and ReachLocal sitting on approximately $65 and $25 million respectively. OrangeSoda has brought in a total of $7.5 million since its founding in 2006. It will be interesting to see how the space shapes out, and if more comprehensive services like OrangeSoda’s can compete with those focusing on specific facets of local search.