By MICHAEL LIEDTKE, AP Business Writer

 Yahoo Inc. Chief Executive Jerry Yang has gotten what he wanted: a chance to prove his company is worth more than the $47.5 billion that Microsoft Corp. offered to buy the Internet pioneer.

It will be a daunting challenge, as Yang will be pointedly reminded Monday when investors are expected to show how little they think of Yahoo without a takeover bid on the table. Faced with resistance from Yang and the rest of Yahoo’s board, Microsoft withdrew its offer over the weekend.

Many analysts believe Yahoo’s stock price, which had climbed nearly 50 percent since Microsoft’s initial offer, will surrender most, if not all, of that gain, leaving the Sunnyvale-based company’s market value around $30 billion.

Disillusioned shareholders are bound to question whether the rejection of Microsoft’s sweetened $33-per-share offer was driven more by emotion and ego than sound business sense.

“Clearly there’s frustration,” said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. “I am not even sure if Yahoo cares about its shareholders because they didn’t show much regard for shareholders’ best interests in this process.”

Despite such negative sentiment, Yahoo shares are unlikely to immediately fall back to their $19.18 pre-bid price, partly because some investors may still be holding out hope that the software maker will renew its takeover attempt if Yahoo continues to struggle.

Yahoo shares finished last week at $28.67, slightly below the $29.40 per share that Microsoft was offering before Chief Executive Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.

Accompanied by fellow Yahoo co-founder David Filo, Yang flew to Seattle Saturday to inform Ballmer that the company wouldn’t sell for less than $37 per share — a price that Yahoo’s stock hasn’t reached since January 2006.

Analysts and investors were left to wonder why the two sides couldn’t compromise at $35 per share.

“They really didn’t seem that far apart,” Chervitz said. “There is probably blame to go around on both sides, but I think most of it is in Yang’s hands.”

Monday’s anticipated shareholder backlash will put Yang on the hot seat as he tries to execute on a turnaround plan that he began drawing up nearly a year ago after he replaced Terry Semel as CEO amid shareholder angst about the company’s financial malaise.

“This squarely puts the pressure on Jerry Yang to deliver results and shareholder value,” Standard & Poor’s equity analyst Scott Kessler said. “You are going to see a lot of shareholders just throwing in the towel because they are going to realize it’s going to take awhile for the stock to get back to where it was Friday.”

Ballmer also will be under the gun to prove he can come up with another way to challenge Google Inc.’s dominance of the Internet’s lucrative search and advertising markets.

The unsolicited bid was widely seen as Ballmer’s admission that Microsoft needed Yahoo’s help to upgrade its unprofitable Internet division.

Analysts now expect Ballmer to use the money he had earmarked for the Yahoo acquisition to explore other possible deals with large Internet companies like Time Warner Inc.’s AOL and News Corp.’s MySpace and promising startups like Facebook Inc. and LinkedIn Corp. Microsoft already owns a 1.6 percent in Facebook, the second-largest social network behind MySpace.

But Ballmer is unlikely to be under as much duress as Yang because most analysts believe Microsoft’s stock price will rise Monday. The shares had declined 10 percent to $29.24 since Ballmer made the bid, reflecting concerns that the proposed marriage would turn into a complicated mess that would enable Google to grow even stronger.

Yang, 39, has promised that Yahoo’s development of a more sophisticated and far-flung Internet advertising platform will produce net revenue growth of at least 25 percent in 2009 and 2010. That would be a dramatic improvement, considering that Yahoo’s revenue rose by 12 percent last year and is expected to grow at about the same pace this year.

But analysts are skeptical about whether Yahoo will be able to hit those targets, raising the chances for a shareholder rebellion if the company stumbles during the next few months — a distinct possibility if advertisers curtail spending in a shaky U.S. economy, as many analysts fear.

As it is, Yang and the rest of Yahoo’s board almost certainly will face more lawsuits from incensed shareholders.

Even some of Yahoo’s own employees may be irritated because virtually all of them own stock options.

What’s more, Microsoft had planned to offer $1.5 billion in retention packages to the thousands of Yahoo employees it wanted to stay on after a takeover.

To help boost its short-term profits and its stock price, Yahoo is widely expected to form a long-term advertising partnership with Google.

Although the final details are still being ironed out, Yahoo wants to hire Google to place some of the text-based ads that appear alongside the search results on its Web site. It’s a task that Google already handles for scores of Web sites, including AOL and Ask.com.

Both Yahoo and Google have said they were encouraged with the results of a two-week trial run completed last month.

But turning to Google for help would be a humbling step for Yahoo after spending more than $2 billion to acquire and build its own technology.

An alliance between Google and Yahoo also would face antitrust hurdles because the two companies combined control more than 80 percent of the U.S. search advertising market.

Although Google’s superior technology would help boost Yahoo’s profits in the short term, some analysts worry it could be a mistake for Yahoo to surrender any control over such a lucrative piece of the online ad market.

Yahoo also has been exploring a possible merger with AOL’s Internet operations, but may now have to contend with a competing offer from Microsoft.

Yahoo also might attempt to placate shareholders by buying back stock.

Kessler believes Yang should use some of his estimated $1.9 billion fortune to personally buy more Yahoo stock even though he already owns 54.1 million shares, or 3.9 percent of the company.

“Jerry Yang really needs to put his money where his mouth is,” Kessler said. “If he really thinks Yahoo is worth $37 (per share), then he needs to step up and buy some shares when they are in the low $20.”

By Daxim Lucas ACCORDING to industry experts, the local advertising business will continue growing this year, just slightly behind the overall uptrend for ad spending throughout the Asia-Pacific.

But nowhere is this growth more exciting — and more unpredictable — than in the realm of online advertising where the country lags far behind its regional peers in terms of total dollars spent.

According to the latest study of the Association of Accredited Advertising Agencies of the Philippines (4As), the total value of the local ad industry stood at $3.08 billion as of the last count.

Of this amount, only an estimated 0.2 percent was spent on online advertising.

This contrasts sharply with the level seen in highly developed markets like Singapore where 7 percent of ad spending went to online and outdoor advertising, with the former taking a significant slice of that pie.

But it is precisely the Philippines’ nature as a largely untapped and underdeveloped market — and its potential — for online advertising that has caught the attention of Internet giant Yahoo!.

Last week, the US-based Internet pioneer said it would open a Philippine unit which would allow it to be better position to profit from “the clear uptrend” in local online advertising as well as to help develop the market, at the same time.

“The potential we see here is tremendous,” said Yahoo! strategic consultant Cris Concepcion, who will help run the company’s local operations under general manager and IT veteran Jojo Añonuevo.

Concepcion explained that the local online advertising business, though admittedly miniscule at present, stands to grow by leaps and bounds especially as more Filipinos get their first Internet experience and go online each year.

“We are seeing local Internet penetration grow by 30 percent every year,” he said. “Already, there are over 20 percent of Filipinos online. That presents significant potential for us.”

Given the mixed fortunes Yahoo! is experiencing abroad, it is making a big bet on the Philippine “Internet ecosystem” where the company holds an estimated 85-percent market share, to a large degree due to the popularity of its Yahoo! Messenger online chat tool.

Thus, for the near- to medium-term future, its business strategy for the Philippines would be based on three big multi-year objectives: to make Yahoo! the starting point for the most consumers; become the “must buy” for the most advertisers; be a “partner of choice” by delivering industry-leading platforms for the most publishers and developers.

“[We] will add value to the Internet ecosystem in the Philippines by enabling users, advertisers, publishers and developers to create indispensable Internet experiences,” Añonuevo said.

On top of that, however, the company also wants to gain a significant portion of the advertising pie — by positioning itself as an indispensable advertising medium — and thus helping grow the pie further.

The officials explained that they want to ensure that the most effective and easiest marketing solutions are provided to advertisers in the Philippines, including the large brands and the small enterprises.

Finally, the company wants to be a “partner of choice” by delivering industry-leading platforms for most publishers and developers.

To enable developers to make most of its assets — its technology platforms and data infrastructure — Yahoo! will deliver industry-leading platforms that are open and flexible to attract the most publishers and developers, the company said in a statement.

“[Our] goal will be to create a motivated community of developers all building uniquely compelling applications that will benefit the Internet ecosystem and provide access to a vast array of highly personalized and relevant services to choose from,” it added.

Indeed, it is a big bet for a big company in a relatively small market. But local Yahoo! chief Añoneuvo has big hopes for the country.

“We believe the online business in this market has a lot of room to grow, and that it can grow to the levels of our regional peers,” he said.

That newspapers continue to lose advertising market share to the Internet is not a revelation. That newspapers are losing share of local advertising is a reason for concern. According to the latest tally, newspapers accounted for 43.7% of the local online advertising pie of $8.5 billion for the first 10 months of this year. This was down from a 44.1% share of a smaller total in 2004. The online revenue of local TV stations, on the other hand, did not decline so precipitously.

Local advertising traditionally has accounted for about 85% of total revenue for newspapers in larger market, even higher for small market newspapers. Local TV stations receive a far higher proportion of their revenue from spot national advertising, while radio stations have tended to be in between, though in most case closer to newspapers than TV. The primary local competitor for newspapers has historically been directories (e.g., Yellow Pages) and direct mail. Increasingly, cable has been able to siphon off local dollars with the capability to insert advertisements down to the neighborhood level.

What must be most unnerving to newspaper publishers and, to a lesser extent other local media players, is that pure play Web sites now have the largest share of local on-line advertising revenue—43.7% by the reckoning of Borrell Associates.

How can this be? Didn’t the publishers take solace in the fact that their local papers had a built in advantage over the upstarts thanks to their identification with the local market? And that all-critical brand equity?

It is becoming evident that the value of ad placement based on search terms, Zip code or Internet address proves more effective for the local advertiser even if the page viewed does not directly contain information that is congruent with the location of the user. That is, the value of the local newspaper or radio station has been that the advertiser had a high degree of confidence that anyone listening to that station or reading that paper was in their local trading area. But online the advertiser may not only be assured that the ad is placed in view of an individual within their target trading area, but may also have specific demographic or other characteristics desirable for that advertiser. Not to mention the added delight of knowing when an ad may have been seen and responded to in the form of a click or more.

Of course, this is true for the online site of any local medium. Too often, however, it seems that while the publisher’s sales force was working on convincing the paper’s current advertisers to try the online version, the new players had no such blinders. They were marketing to anyone, which often meant new service providers and merchants who had not been print advertisers: smaller in size but far greater in number. A version of the long tail effect. And that is where much of the growth is coming from. It’s not just old advertisers in new bottles.

By SETH SUTEL

NEW YORK - Online advertising jumped 25 percent this year, raking in a cool $20 billion, but Internet executives say that figure could have been even higher if advertisers had reliable and consistent ways to measure online audiences.

Unlike traditional media, where each format has one main ratings provider — The Nielsen Co. for television, Arbitron Inc. for radio and so on — there are many sources of data on online audiences. And they frequently conflict.

Disagreement also continues over which criteria best gauge users’ potential interest in a product or service. And the resulting data aren’t easily comparable to ratings in other media anyway.

It’s a “problem of plenty,” as Manish Bhatia, president of global services for Nielsen Online, a unit of The Nielsen Co., told a recent conference on online audience measurement.

Web publishers are frustrated that the lack of cohesion is holding them back from capturing more of the $250-billion-a-year U.S. advertising pie, especially given the huge amount of time people spend online.

“This industry looks like it can’t get out of its own way,” said Steve Wadsworth, president of The Walt Disney Co.’s Internet group. “We need measurement of the audience and their use of the system that’s clear, simple and actionable for a marketer. You need comparability with other media.”

As Internet executives hash over clickstreams, page views and user panels, 2008 is sure to see even more evolution of the way online audiences are measured. Other media — including TV, radio and billboards — also are revamping the way they calculate ratings in response to pressure from advertisers trying to measure how effective their ad dollars are.

David Hallerman, senior analyst at research company eMarketer Inc., said many large advertisers remain shy of the Internet because of confusion over audience measures. Some also want to stick with video ads, which are still in their early stages on the Internet.

The Interactive Advertising Bureau, which represents more than 300 Web publishers, has called for Nielsen Online and comScore Media Metrix to undergo audits by the Media Rating Council, a process that is still under way. ComScore and Nielsen both still use panels, while Quantcast Corp., a relatively new agency, combines panel and Web-based data to produce ratings.

Resolving what to measure is as complex as deciding how to measure it. Some sites produce their own ratings based on internal server logs, on the theory that panel-based data understate traffic. But comScore says internal logs can overstate traffic when users delete identifying files called cookies from their browsers because servers think they’re seeing a “unique visitor” each time that user arrives.

Counting unique visitors can also be challenging — and lose meaning — when an individual logs in to several different computers, or a family of six all use the same computer. “Page views,” once a key indicator, haven’t been since Ajax software let people view different elements on one page instead of going to a new page for each one.

From any vantage point, there’s still no clear equivalent for reaching a potential audience of 18 million people around the country at the same time with a single ad on “Desperate Housewives.”

“There aren’t well-established, tried-and-true standards in the industry, which need to be worked through,” said Jeff Marshall, senior vice president of digital marketing at Starcom USA, a major ad-buying agency. “The concerns are escalating as more and more of our clients are shifting significant amounts of money into the space.”

Traditional measures may not even apply to the Web, some executives say, because the benefits the Web offers — most notably, the opportunity for users to click right through and buy the advertiser’s product — aren’t comparable to other media.

But Web publishers want to give advertisers some basis for comparison.

“Advertisers want to be able to understand that their online spend got this reach, and their offline spend got that reach,” says Jim Spanfeller, president and CEO of Forbes.com.

Or, as Randall Rothenberg, CEO of the Interactive Advertising Bureau, put it: “Marketers want to know, If I take $10 out of TV and put it into online, am I getting $10-plus back?”

Peter Daboll, a research guru at Yahoo Inc. who holds the title Chief of Insights, acknowledges that it’s still a “challenge” to work through the various kinds of online data.

“We’re not dealing with a perfect science here,” said Daboll, formerly chief executive of comScore. “What we’re trying to do with our advertisers is take some of the mystery out of this.”

Indeed, advertisers are demanding just that.

Bob Liodice, CEO of the Association of National Advertisers, said corporate leaders have been ratcheting up the pressure on marketing departments to justify their ad budgets with hard proof they are generating business.

In response, TV broadcasters this fall started counting how many people watch commercials during a show. Radio ratings company Arbitron Inc. is rolling out a new electronic measurement system that uses a portable device to capture what stations people actually hear, instead of what they recall hearing. The system is running in Philadelphia and Houston, with nine more markets to be added in September.

And the outdoor advertising business will replace estimates of vehicle and pedestrian traffic in front of billboards with a measure that takes into account how visible a certain billboard is. The new measure will also include estimates of demographic data, something other media already provide.

Advertisers seem fed up with the adage that half their ad spending seems to work, they just can’t tell which half.

“CEOs finally said, enough is enough,” Liodice said. “We have to know with greater specificity what comes out when something goes in.”