Yahoo CEO Jerry Yang today promised the world 500 to 700 engineers will complete Yahoo's brand advertising platform by the third quarter. The announcement was Yahoo's second public response today to Microsoft CEO Steve Ballmer threat to lower Microsoft's bid for Yahoo over the weekend. According to the clip above, the platform — once called Project Apex, now dubbed AMP — is supposed to provide the technology for publishers to sell their own display, search, mobile and video ads through a Yahoo marketplace. Problem is Apex/AMP is not near completion, commenters on our post "Employee: Yahoo is a mess inside," tell us.

In a letter addressed to "Dear Steve," Yahoo CEO Jerry Yang and chairman Roy Bostock responded this morning to Microsoft CEO Steve Ballmer's weekend letter. The pair write that Yahoo is not opposed to a Microsoft "transaction," but that at $42.25 billion, Microsoft's merger bid remains too low. Bostock and Yang also reject Ballmer's clam that Yahoo management refuses to negotiate. They admonish: "Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit." Sounds like a call for the monkey dance to us. Yang and Bostock's whole letter is embedded below.

"Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) continue to play the cat-and-mouse game out in the open, even on the weekend: MSFT has send a letter to Yahoo board, and has set a three-week deadline for Yahoo to accept its current $31 a share offer or Microsoft will take its case to Yahoo shareholders. This could also mean a lower offer from Microsoft in case of a proxy war."

Microsoft CEO Steve Ballmer is tired of waiting on Yahoo CEO Jerry Yang and the Yahoo board to realize it's time to negotiate. He's sent an angry letter to the board. "We've seen no indication that you have authorized Yahoo! management to negotiate with Microsoft," he writes.

Microsoft is looking at its $42 billion bid for Yahoo in light of "worsening market conditions" according to Reuters.

At 10 a.m., Jeff Bonforte, the ex-Yahoo who's now CEO of Xobni, described his status on LinkedIn as "legal documents up to my ears." What could have him so submerged? Microsoft has long been rumored to be interested in Xobni, which makes a plugin for its Outlook software. Not long ago, Microsoft startup scout Don Dodge took the startup's small team to dinner, but Xobni's said to have balked at a sub-$20 million offer they viewed as lowball. If Bonforte has actually persuaded Microsoft to raise it, he'll have earned his pay. The irony, if a deal happens: Bonforte will likely end up working for Microsoft long before his former colleagues. Update: Xobni cofounder Matt Brezina tells me the legal documents are for intellectual-property licenses, not a sale. Sounds dreadfully boring — and good training for a career at Microsoft if the widely expected purchase goes through.

Microsoft and Yahoo execs met this week in Sunnyvale, but the talks didn't go anywhere. The sticking point: Microsoft CEO Steve Ballmer's troops refused to consider raising their cash-and-stock bid and so Yahoo CEO Jerry Yang's representatives likewise refused to initiate "formal negotiations," the WSJ reports. Meanwhile, commenters confirm that while its new brand advertising platform flounders, Yahoo "is indeed a mess inside. Yahoo is full of pissing matches at the VP level." Please, tell us more.

Commenter and steadfast Yahoo apologist MarktheMarketWatcher zings Google's skimpy severance package for laid-off DoubleClickers:

"People want a single phone that's flexible enough to meet their needs throughout their day, whether it's connecting to work or your everyday life." — Microsoft executive Robbie Bach, on the iPhone [Microsoft.com]

For some of the Web's more respected names, it's a really special day. They get to treat their readers and fans with the contempt they hide most of the year. Below, five pranks today that show just how much the Internet hates you. And I do mean you.

Institutional investors aren't the only ones growing increasingly impatient with Yahoo management. One Yahoo tipster tells us that "from the view of an employee, Yahoo is a mess inside." The employee tells us that Apex, the brand advertising system that's supposed to help increase Yahoo's revenue 72 percent by 2010 "is being made by the same fools that did Panama" — Yahoo's long-delayed search marketing platform:

Yahoo's board and top executives continue to hope Microsoft will raise its per share bid to $40, or at least the mid-$30 range. Not going to happen, a source close to Microsoft told the WSJ. Microsoft CEO Steve Ballmer and company consider Yahoo's talks between Time Warner and News Corp dead, and "there's no reason to bid against ourselves," this person told the paper. Meanwhile, frustrated Yahoo institutional investors told BoomTown they plan to support Microsoft in a proxy fight.

When insiders sell, most market watchers take it as a sign that the wheels are coming off. What to make, then, of Microsoft SVP Bob Muglia's latest stock move? Muglia, a stalwart cheerleader for Microsoft's Windows Vista, owns 6.7 million Microsoft options rendered worthless by the drop in its stock price. But he also has a sure way to profit from the slumping price. Last October, Muglia wrote a call option requiring him to sell $1.6 million worth of Microsoft shares, but only if the stock hit $32.50. The option expires on April 18; unless Microsoft shares rise dramatically in the next two weeks, Muglia's set to pocket whatever money he made selling the option. A wise move, except for the appearance of betting against his employer.

Ever since Yahoo CEO Jerry Yang put out a shareholder presentation promising a 72 percent revenue increase by 2010, hostilities have quieted between the Microsoft and Yahoo. That's because merger negotiations are heating up. BoomTown's Kara Swisher reports that Microsoft might raise its offer to somewhere between $34 and $36 per share to seal the deal. Microsoft CEO Steve Ballmer is also said to be considering offering more cash and less stock in a new bid, fattening Yahoo retention packages, and giving Yang and Yahoo president Sue Decker independence to run the company after it's owned by Microsoft. A display of such gratitude from Ballmer may seem uncharacteristic — until you remember that Yang and Decker's management is what landed Yahoo in this spot.

Tabloid newspapers are alien to the Valley. A scandal sheet like the New York Post rarely covers tech — and those are the only days you read it. We understand that it's jarring. Here's how to decode the Post's recent report on Microsoft's attempt to cobble together a Yahoo board.

Who says there's no such thing as karma? A couple of years ago, Yahoo and its cofounder Jerry Yang did the Chinese government a big favor. Something about putting mouthy writers in jail. And now, the New York Times reports, a law that goes into effect this August will make the Chinese government Yang's best hope for fending off Microsoft CEO Steve Ballmer.

Once a year, I have trouble falling asleep, I'm just so excited. I say my prayers to the developers of OpenOffice, slide under the covers and just lay there thinking about all the documents I'll get to open in the morning. There'll be text documents, and spreadsheets — maybe even presentation slides! Only after a few hours of listening for the pitter-patter of comma-separated reindeer do I finally fall asleep. Well, that day is here again this year — Document Freedom Day! Google's Zaheda Bhorat can hardly contain her glee:

Charmingly indiscreet Yahoo engineer Rob Menke seems to think Jerry Yang is concerned about Valleywag's reporting on the Yahoo CEO's efforts to resist Microsoft's acquisition. Yesterday Menke twittered:

In response to the rumor that Jackass star Johnny Knoxville is the new Microsoft pitchman, a company spokesperson emails: "Microsoft is planning a consumer advertising campaign with Crispin Porter & Bogusky. We have no other details to share at this time."

Forget Justin Long as Mac and John Hodgman as PC. The latest computer pitchman could be Johnny Knoxville, star of MTV's Jackass series. A reader of the blog Cajun Boy in the City claims to have been in a focus group for an unnamed company he believes is Microsoft. Redmond's marketing execs recently hired ad firm Crispin Porter & Bogusky, the creators of Miller Lite's "Man Laws" campaign and Burger King's live-action "King." The reader writes: