For once, tech publisher John Battelle has timed a bubble just right. With Wired, where he was a founding editor, he was too early; with The Industry Standard, the tech weekly which crashed and burned early in this decade, a bit too late. But with Federated Media, he's proved his dealmaking prowess. He's all but nailed what we hear is $40 million to $50 million in venture capital for the online-ad network , on a $200 million valuation. And this right before AOL bought Sphere, a blog search engine which, by a rough count, serves more than half of the pageviews Battelle sells to advertisers.

AOL has purchased Sphere, a San Francisco-based startup whose service places links to related stories and context-sensitive ads on article pages, for an undisclosed amount. The advertising part is likely the draw; Sphere's clients include magazine publisher Time Inc. The new inventory should lengthen AOL's already impressive reach. In March, 170.5 million unique visitors, or 91 percent of U.S. Internet users, took in an AOL ad. Before selling, Sphere raised $4 million in venture capital from Hearst Publishing, Trident Capital, True Ventures and About.com founder Scott Kurnit. [PaidContent]

While Yahoo's board dithers over whom to sell the company's soul to, VC blogger Fred Wilson has a different plan in mind. "Yahoo should reject the offer and what they should do instead is break up the company into a series of smaller companies," he told TechTicker in the interview excerpted here. Yahoo's entertainment sites could be one spinoff; its HotJobs website another, he says. Left unsaid: A broken-up Yahoo would mean more buyers for the small startups Wilson backs.

AOL moved into its new New York headquarters today, and new ad boss Lynda Clarizio has roped Verizon into paying a portion of the lease. The companies announced a deal today that will make AOL's Platform-A the exclusive manager of Verizon's Web and wireless ads. That inventory includes 94 million pageviews a month. It's Clarizio's first big deal after replacing Curt Viebranz in an internal coup earlier this year. He was the the sixth advertising chief at AOL since 2001. But should we be that impressed?

Yahoo CEO Jerry Yang, chairman Roy Bostock, and the rest of the Yahoo's board met on Friday. After reviewing the company's options — begin negotiations with Microsoft, merge Web properties with AOL, or outsource search advertising to Google — the board went with a perhaps underhyped fourth option. It postponed any decision and decided to meet again, the New York Times reports. Maybe with AOL, Microsoft, or Google representatives at the table. We'll see. Meanwhile, Yahoo executives want reporters to know that Yang should just hurry up and sell to Microsoft. Overlord-welcoming readers, by a margin of 2-to-1, agree.

Yesterday, at a luncheon with several dozen VP-level minions Yahoo CEO Jerry Yang hosted tried to explain the reasoning behind a potential deal with AOL and Time Warner. Didn't go over so well. But while many of these invitees were happy to later share their horror at the idea of merging AOL and Yahoo Web properties, none managed to grow a pair and tell Yang. Now is your chance people. Should Yahoo merge with Microsoft or take Time Warner's money? Tell us in our latest Valleywag poll.

While Microsoft's Steve Ballmer and Yahoo's Jerry Yang exchange angry letters over the fate of their companies, AOL CEO Randy Falco has this for his legions:

At MySpace headquarters in Beverly Hills, playbooks are stacked on desks as Rupert Murdoch's minions desperately try to make the numbers on a Yahoo deal work. Murdoch's News Corp. has joined forces with Microsoft in an effort to counter a deal with the mogul's old enemy, Time Warner. Google, which all old-line media companies fear, is approaching a bid with languorous rigor, running a small test of placing its ads on some Yahoo pages. It's all rather depressing.

New York State Assemblyman Richard Brodsky wants to fine online advertisers for using consumers' private information without their consent. Jim Halpert, top flack for a coalition formed by Google, AOL, Yahoo, Facebook and others said such a law "is unnecessary, most likely unconstitutional, and would have profound implications for the future of Internet advertising and the availability of free content on the Internet." Unimpressed, Brodsky told the Wall Street Journal, "These guys want the unadulterated right to invade the privacy of the citizens of this state and we're not going to let them do that," he said. "This is why we have governments, not just corporations." That's right — god forbid anyone privatize the government's vital job of invading your privacy

As Microsoft, Yahoo, Google, AOL and News Corp. go at it tag team-style, PaidContent rounded up Wall Street's opinion on the proceedings. The bullet-list version, below.

News Corp. is now discussing a possible joint takeover bid for Yahoo with Microsoft, according to unnamed sources cited by the Wall Street Journal. Meanwhile, Yahoo is now discussing combining Internet operations with Time Warner-owned America Online as part of a three-fold move to stave off the takeover bid that includes teaming up with AOL, buying back much of the company's stock and running search ads from Google. Analysts quoted in the Journal still suggest the sale to Microsoft is a fait accompli, and that Yahoo is just trying to get CEO Steve Ballmer and company to cough up a higher bid for shares.

Why were AOL CEO Randy Falco and COO Ron Grant so secretive about buying Bebo? Because they knew much of AOL management hated the deal, Silicon Alley Insider reports. Executives from AOL subsidiaries Advertising.com, Platform A and Userplane would all have worked to kibosh the $850 million deal if they'd known more about it, so Falco and Grant kept them out of the loop. Supposedly, Grant and Falco pushed ahead with the deal because they think Bebo makes AOL a more attractive acquisition target. One source called the buy "Grant's last stand." Below, SAI's account of precisely what's to hate about Bebo, according to AOL execs.

AOL CEO Randy Falco and President Ron Grant — check out the photo and you'll see why the rank and file call them "Smithers and Burns" — kept plans to buy fourth-place social network Bebo secret from AOL's other top execs. Acquisitions talks are often kept quiet, but BoomTown sources say Falco and Grant were more secretive than usual. Can't say we blame them. The exchange — "We're targeting Bebo." "Who?" — has to get old.

Michael and Xochi Birch met in a London pub back in 2005. Later, the pair decided to launch a social network from their San Francisco living room. About 40 million people signed up and two years later, AOL plunked down $850 million to buy the site. The Birches, who reportedly owned a 70 percent stake in the company, walk away with $595 million. Our advice for the first few dollars spent, below.

AOL will try to follow its $850 million Bebo acquistion with another, the purchase of white-label social widgets maker KickApps. BoomTown reports AOL exec Ira Parker and KickApps chairman and founder Eric Alterman remained in negotiations as late as this week. They're haggling over a $90 million price tag. That AOL's willing to pay so much for an also-ran social-network tools startup suggests AOL's position isn't so much "leading" as "over a barrel."

"Compared to the $6.1 billion Microsoft paid for aQuantive and the $3 billion Google paid for DoubleClick I feel we have done a pretty good job here." — AOL CEO Randy Falco, explaining that the fact that his predecessor, Jonathan Miller, spent $435 million to buy Advertising.com somehow makes up for the $850 million Falco just spent on Bebo. [Guardian]

When new AOL ad boss Lynda Clarizio replaced Curt Viebranz, his head was the sixth to roll at AOL since 2001. Viebranz followed Myer Berlow, Robert Friedman, Robert Sherman, Lisa Brown and Michael Kelly. Three lasted less than a year. None of them succeeded, according to Bits, because AOL's reputation on Madison Avenue remains tattered from the pre-merger days when Berlow and former AOL CEO Bob Pittman would spurn agencies to work directly with marketers, locking them into long-term deals at inflated prices. Take heed, Google's Tim Armstrong. (Photo by macloo)

Before agreeing to sell to AOL for $850 million, Bebo president Joanna Shields tried to sell the company to News Corp., Google, Yahoo and CBS. Didn't happen. Bebo gets too little traffic in the U.S., sources from those companies told BoomTown. Microscopic revenues probably didn't help Bebo reach its hoped-for $1 billion pricetag, either. In 2006, Bebo revenues were $7 million, with just $3 million in EBITDA — Wall Street's favored measure of operating profit. Last year, total revenues climbed to $20 million, $5 million in EBITDA. So that's a price-to-earnings ratio of 160. Oh, maybe AOL CEO Randy Falco's valuing it on growth, you say? Let's run those numbers.

AOL CEO Randy Falco said the $850 million Bebo acquisition put his company in "a leading position" in social networks. Too bad his claim doesn't jibe with ComScore's chart comparing Bebo's traffic to social networks MySpace and Facebook, above. Where was "human computer" Ron Grant when Falco needed him to do some math? Below, more damning stats from Hitwise.

With Curt Viebranz out, AOL's new advertising boss Lynda Clarizio plans to integrate the Time Warner subsidiary's various ad sales teams — those from acquisitions Tacoda and Quigo, for example — into one. That will create redundancies which Clarizio plans to handle by axing about half of AOL's sales force, Silicon Alley Insider reports. Top executives at Advertising.com will fill new roles running all of advertising for AOL.