As the need for fast, large-scale computing to power sites like Facebook or even computing clouds has grown, manufacturers such as Rackable Systems are taking notes on server design from Google, which builds its own systems. The goal of their mimicry is to provide more computing power in a smaller form factor while using less energy.

An article in EEtimes today details the emergence of these Google-inspired servers, which include features such as heat-tolerant processors to save on cooling costs, a focus on motherboards containing 12v-only power supplies for servers, putting two servers on one board and stripping out unnecessary parts.

These are all ways Google apparently modifies its boxes to deliver information faster and more cheaply. Rackable’s new CloudRack servers will offer dual servers on one board that crams more computing power into a smaller space, as well as 12V-only motherboards. The use of only 12 volts on a motherboard is supposed to make the power supplies more efficient by reducing the energy lost when having to convert electrical current to run at various different voltage levels.

IBM’s iDataPlex servers, designed for the cloud, have stripped away unnecessary hardware — a move aimed at reducing power-consuming components and saving space. Heat-tolerant processors allow a data center operator to keep air conditioning bills down, saving as much as 4 percent of total energy costs for each degree dropped. So as computing requires more scale, Google’s innovations influence other buyers and sellers of technology even as the search giant slows its own data center construction.

In a nod toward privacy, today Yahoo  said it would only keep personal data on searchers and portal users for 90 days (double that in cases of fraud or suspicious activity). This ups the ante for other search firms Google, which halved its data retention time to nine months in September, and Microsoft, which has said it will drop its data retention times to 6 months if its competitors did. Prior to this announcement, Yahoo kept data for 13 months.

Here’s how Yahoo plans to scrub the data, which includes not just search, but page views and ad views as well:

• Delete the final octet of the IP address
• Yahoo! ID will be one-way secret hashed and the last 50% of the hashed identifier is truncated
• Cookie identifiers are one-way secret hashed
• We add an additional search filter for personally identifiable info in search logs such as credit card numbers or social security numbers

The search firms are responding to increasing government and consumer concern about online privacy–namely a European Union effort to get search firms to delete user information after 6 months — and likely the creation of a telecommunications-backed lobbying group that hopes to set the nation’s agenda when it comes to online privacy. Microsoft has a member on the board of that group, called The Future of Privacy, but Yahoo and Google do not.

Yahoo’s move is a good start for those concerned about privacy, but we’re still going to have to start talking about what controls consumers have with regard to their data and when privacy trumps the greater good.

I’ve spent the past few days pretty immersed in the SC 08 conference here in Austin, Texas, but I’m still embarrassed that I missed the formation of a new lobbying organization think tank called The Future of Privacy that’s being funded by AT&T. The group hopes to help policy makers and business leaders figure out how to manage online privacy.

A big source of irony from the group, other than its purported focus on online privacy to benefit consumers and the industry alike, is that Co-chair Christopher Wolf also headed up one of my favorite astroturfing efforts, Hands Off The Internet, the phone company think tank dedicated to Net Neutrality. Somehow, that connection isn’t mentioned in his FOP bio. Wolf is a litigation partner in the Washington, D.C. office of Proskauer Rose LLP, a firm that does work for AT&T. The other co-founder of FOP, Jules Polonetsky (here’s a great interview on his views on Internet privacy), was the former chief privacy officer at AOL. Prior to that he worked at DoubleClick, which was bought by Google.

The creation of the FOP is both a good thing and bad thing. It’s a sign that consumers worried about how their private information is collected and used on the Internet have been taken seriously. On the other hand, the backer and members of this particular organization are highly likely to influence legislators in a direction that will keep consumers’ data in their hands.

I hope that some of the more privacy focused representatives can cut through the corporate double-speak that I have seen firsthand from the telecommunications companies on other issues. Perhaps Google, which is not represented on the board, can start its own privacy think tank and we can watch the fight unfurl between caching private data for later use, and profiting from data as it travels through the ISPs’ pipes.

This issue of Internet privacy has gained more momentum in the last few months after ISPs contracted with a startup called NebuAd to monitor where a consumer surfs the web and serve ads against those visits. Other companies are trying this as well. Since then, Congress has held two hearings on online privacy, with one related to data collection and the other related to deep-packet inspection as employed by NebuAD and its ISP customers.

As the online experience becomes more interactive, the rules around of who’s watching us as we’re watching the web need to be defined. But in addition to worries about corporate spying, legislators and lobbying organizations should also take a close look at what governments can now access and use. For those of you following this space, the advisory board includes:

• Dorothy Attwood, Senior Vice President, Public Policy and Chief Privacy Officer, AT&T, who went before Congress to decry NebuAd’s tactics but noted that perhaps in exchange for lower rates a consumer might be willing to share more data with the ISP
• Chris Kelly, Chief Privacy Officer and Head of Global Public Policy, Facebook, the company that brought you the privacy nightmare known as Beacon
• Simon Davies, Director, Privacy International
• Peter Swire, a law professor at Ohio State University and Senior Fellow, Center for American Progress, who is advising President-elect Barack Obama on technology

Looks like Yahoo’s Jerry Yang’s ham-handed handling of the Microsoft offer is coming back to bite him. At a Friday business lunch in Australia, Steve Ballmer, CEO of Microsoft, put on the airs of a spurned lover and told luncheon attendees that he wasn’t buying Yahoo, although he might consider a search engine partnership. The Associated Press quotes Ballmer as saying:

“We made an offer, we made another offer, and it was clear that Yahoo didn’t want to sell the business to us and we moved on,” Ballmer said. “We are not interested in going back and re-looking at an acquisition. I don’t know why they would be either, frankly. They turned us down at $33 a share.”

Well it looks like Ballmer is reading his advice columns and standing up for his self-esteem. Either that or his lawyers have had a quick chat with him after his comments a few weeks ago, when he said a Yahoo deal still made sense economically.

Yahoo’s shares, which ended Thursday’s session at $13.96 a share, look like a bargain, and on Wednesday, Yang even said he’d do a deal with Microsoft after a search partnership with Google fell through. The question now becomes whether Yahoo would lower itself to a search partnership with Microsoft or if it will try to hold out for marriage. If the two companies let hurt feelings stand in the way of a partnership or a deal, it’s Google that wins.

Perhaps the managerial bankruptcy at Yahoo was what led the beleaguered Internet company to believe that its biggest competitor, Google, would be its savior. Apparently it bought into Google’s spin about “doing no evil.” Well, today Yahoo is learning a lesson that everyone in the technology world needs to learn fast: Google is nobody’s friend. Just like Microsoft wasn’t a charity, Google, too, is capitalistic venture whose first and only goal is to stuff its coffers with cash — never mind what its leaders say publicly. In a blog post, David Drummond, Google’s chief legal officer, announced today that the company is withdrawing from the so-called Yahoo-Google advertising partnership, mostly because it was getting too much scrutiny from the federal government.

However, after four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.

Despite those innocent-sounding words, deep down Google has to be secretly rejoicing over freezing Yahoo into inactivity. Did anyone actually believe that this deal was going to sail through? I sure didn’t. But apparently, in their desire to save themselves from Microsoft, Yahoo forgot that the guys in Mountain View, Calif., only play hardball.

At the time of the deal, I pointed out that, “[T]he U.S. government investigation is going to entangle Yahoo in underwater weeds of uncertainty. Google, on the other hand, will be victorious in defeat — they would have frozen Yahoo into inaction for awhile.” Yahoo “is shooting itself in the face with this deal,” I said then, likening the deal to knowing that “your spouse is going to divorce you while you’re standing in the aisle, waiting for the priest.”

Where does it leave Yahoo? That answer will come in a later after I return from the Web 2.0 conference.

Update: Statement from US Department of Justice:

Yahoo! Inc. and Google Inc. abandoned their advertising agreement after the Department of Justice informed the companies that it would file an antitrust lawsuit to block the implementation of the agreement. The Department said that, if implemented, the agreement between these two companies accounting for 90 percent or more of each relevant market would likely harm competition in the markets for Internet search advertising and Internet search syndication.

“The companies’ decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action,” said Thomas O. Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division. “The arrangement likely would have denied consumers the benefits of competition –lower prices, better service and greater innovation.”

The advertising network business is going to go through a gut wrenching shakeout which is just about getting started. The Wall Street Journal says trouble is looming for 300-odd niche ad networks and points to the shuttering of JellyCloud and lay-offs at SF-based AdBrite. Even Advertising.com, a division of Time Warner is suffering from softening of demand.

Pubmatic recently released their Q3 2008 data which showed that the average CPMs continued to be in a free fall, especially on the social networks. This doesn’t bode well for the market at large.

But as the climate has soured, network executives say many ad deals in the pipeline have been reduced or pulled. Tight wallets have forced ad agencies to get tough, even canceling ad deals to get a better rate. Faced with tighter budgets, media buyers say they probably will place their ad dollars with top networks that offer the most-sophisticated technology and are capable of reaching the largest audiences.

The problem with many of the ad-networks is that there is very little technology that differentiates them from one another. Many of them have coasted on the strength of their relationships with advertising agencies, which according to those in the know are very fickle. The tightening budgets and collapse of spending from auto makers and financial sector companies is resulting in the noose tighten around the ad-network operators.

UBS, an investment bank had recently warned that “as corporate profit forecasts come down, we expect planned advertising spending will be delayed and/or cut.” With spending down, most advertisers are going to look for performance based advertising. Now that is good news for at least one company: Google. You already knew that!

Google today announced its third quarter 2008 earnings - which were in-line with investor expectations, thus giving market a reason to exhale. For the quarter, Google reported net income of $1.35 billion on sales of $5.54 billion.

Google partners however, should gulp hard, for the Mountain View, Calif.-based search and online advertising company is keeping more and more of its online ad bounty for itself. You can see that from the three metrics: revenues from Google-owned sites, revenue generated by partner sites and the traffic acquisition costs. Google’s partners piece of the pie isn’t growin that much. Check out the table:

What that table is saying is that Google today is less reliant on partners for ad-inventory. This shift isn’t going to change anytime soon, especially as Google launches more and more ad-supported services and finds new users for Google Mail and Google Android.

Microsoft today unveiled its next-generation Communications Server product that will allow users to replace their existing phone systems with Microsoft’s software. It’s about time Redmond pushed its VoIP offering further. The product, which goes on sale in February 2009, replaces a PBX system with Microsoft’s VoIP software on a server, allowing employees to make calls to any phone number, to make calls from within Microsoft documents and adding audio conferencing.

The VoIP functionality and integration with Microsoft’s SharePoint product is Microsoft’s answer to the challenge Cisco is offering in the unified communications space. It has some nice features, especially the ability to use presence awareness, VoIP and IM on select mobile phones.

It’s funny how the more things change, the more things stay the same: I recall back in 1999 writing about unified communications, which at that time meant a one-stop online shop for emails, voicemails and faxes, with nothing real time about it. Today, we have the ability to connect with people in real-time via IM or VoIP while simultaneously sharing online documents, but we’re still looking for that one-stop repository for all of our communications.

Microsoft aims to make its programs that one stop, by tying this next generation Communications Server to its SharePoint software. It allows users to see presence and call while within Microsoft programs, meaning employees don’t have to go to a separate presence application to talk or IM about a spreadsheet or Word document. That makes Office the one-stop shop for all communications, including those in real-time.

Cisco is taking a different tack, judging from its recent acquisitions and its CEO’s comments about the opportunity. It plans to create a separate layer of communications services such as IM and VoIP that will sit in the network and work across a variety of applications. If it can be a well-integrated, neutral vendor, it could blow Microsoft out of the water.

Last Friday afternoon, the FCC issued a report putting to rest worries about interference from a free wireless broadband service using the AWS-3 spectrum, paving the way for an auction sometime next year. However, opponents of the auction, including T-Mobile, aren’t going to give up without a fight.

The original proposal for the spectrum, put forth two years ago by a Kleiner-backed company called M2Z Networks, had asked the FCC for use of the spectrum in the 2155-2175 MHz band to create a wireless broadband service. M2Z offered the FCC 5 percent of its revenue in exchange for the spectrum. It also pledged 25 percent of its network for free broadband service at lower speeds. The company would charge more for faster speeds and would build out 90 percent of its network in 10 years at a cost of $2 - $3 billion.

In June the FCC issued its own rulemaking proposal, which hewed closely to the M2Z proposal. The FCC proposal would also restrict material that could be deemed obscene and “harmful” to children between ages 5 and 17 (i.e., porn) on the resulting wireless broadband network. Update: An FCC spokesman says that aspect of the proposal will likely get tweaked during the rulemaking process to allow adults to opt-out of such filters.

T-Mobile had argued against the potential auction and use of the spectrum on the grounds that it would interfere with services deployed on the neighboring AWS-1 spectrum, which T-Mobile leased for $4 billion. But it appears that FCC Chairman Kevin Martin, isn’t buying into the argument now that T-Mobile’s filters have proven to be ineffective at keeping out content from the nearby spectrum. “You shouldn’t have equipment that reads spectrum you don’t own,” Martin told Dow Jones.

Damn! Who is this reasonable, carrier-smacking FCC chair? It’s nice to see a potential wireless broadband competitor making it out into the world, but the content limitations should give everyone pause. A whole mess of litigation will stand between this network and real use, as any government-created wireless broadband network should probably be free of censorship.

Meanwhile, a mess of litigation might still stand between an AWS-3 auction and the creation of a network, as T-Mobile seems inclined to release the lawyers if the FCC goes forth with its proposal. The company issued a statement from Kathleen Ham, VP of federal regulatory affairs, via email, but didn’t answer my question about suing to protect its interests directly. The statement read:

While we are glad the FCC engineers finally put their observations on the record, we have serious concerns that their analysis is flawed and relies on factors that were not the subject of the testing, while ignoring other important data in the record. In light of this, we are concerned that the result was predetermined unfairly. We and the multiple parties concerned about interference will strongly urge the FCC to provide for sufficient time for comment on their report before any FCC action on these rules.

I may have to eat my words about the unliklihood of wireless broadband competition, but I’ll wait until the networks are up and devices are out before admitting defeat.

In times of trouble people like to revisit what they know, and what could be more familiar than the ever-present effort to get Microsoft and Yahoo together at last? Mithras Capital Partners has floated a proposal that Microsoft buy Yahoo for $22 a share, or 74 percent more than its closing price on Thursday. According to Reuters, Microsoft could then unload Yahoo’s Asian assets and recognize $3 billion in savings, making for a total deal cost of $10.3 billion.

Since the plan seems crazy, given the MicroHoo history, Mithras’ small stake (.14 percent) and the current economy, I wondered who the heck Mithras Capital is, and a bit more about its investment strategy. Surprise, Mark Nelson of Mithras Capital is not a fan of the Yahoo-Google search deal! While Mithras has been pushing a sale of Yahoo to Microsoft for months, they also have ownership stakes in SourceForge (5.6 percent as of August) and Transmeta (4.9 percent in June). SourceForge owns the Slashdot web sites as well as ThinkGeek. Apparently Mithras has tried to meet with management at SourceForge, but management has refused.

Transmeta, the beleaguered chipmaker turned intellectual property shop, put itself up for sale in September, and has seen its stock reach a 52-week high while the rest of the market bombs. There’s no indication in Mithras’ SEC filings that they’ve met with Transmeta executives. Perhaps this Yahoo stunt is an attempt to get its name in the paper and strike fear in the hearts of management at its other investments. Or maybe given the economy, it feels it has nothing left to lose.