WEB 2.0 SUMMIT — On stage, Facebook CEO Mark Zuckerberg tells an audience of hundreds that his company is "happy" with its Microsoft relationship. That, of course, would be the relationship where Microsoft has exclusive control of Facebook's display-ad inventory — the relationship that Facebook, insiders say, is desperate to wriggle out of. There's only one logical reading of this response: Microsoft and Facebook have renegotiated their ad deal, allowing Facebook to sell its own ads in the U.S. — most likely in exchange for letting Microsoft take a stake in the company, shutting out Google and Yahoo. Could this really be the end of Facebook's big-money drama? (Photo by AP/Paul Sakuma)

"We're not a media company." — Facebook CEO Mark Zuckerberg. "I've heard that somewhere before." — Web 2.0 Summit program chair John Battelle, referring to Google CEO Eric Schmidt's denial, later recanted, that he was running a media company.

WEB 2.0 SUMMIT — Facebook CEO Mark Zuckerberg has taken the stage at John Battelle and Tim O'Reilly's Web conference, and he's proved to be game for questions. Battelle, clearly expecting a nonresponse, asks Zuckerberg about his company's financing — the sale of a small stake that would value the company at as much as $15 billion. Instead, Zuckerberg gamely smiles and says, "Great. It's almost wrapped up." The crowd, a bit shocked, breaks into laughter. Battelle then asks about an IPO. Zuckerberg says, "Definitely years out." (Photo by AP/Paul Sakuma)

Yahoo exceeded expectations with its third-quarter results yesterday. Panama, Yahoo's new search-ad system, is at long last paying off, if not in the grand ways Yahoo execs promised. And, after dipping 4.7 percent in yesterday's trading, Yahoo shares jumped 9 percent after hours. Why? In short, Yahoo investors discounted the quarter as old news, and focused on management's guidance for the future. They're ready to move on, in other words, and grant CEO Jerry Yang and president Sue Decker the "redo" they asked for. If only the actual company were ready to move on, too. But with its new plans, it appears to be repeating old mistakes.

Last week, eBay announced a few me-too social-network features allowing users to blog and share photos. Too bad it's not 2004. Meanwhile, Facebook is getting more serious about invading eBay's turf. Today, Facebook announced that developers can now write apps to search Facebook's Marketplace classifieds and create listings for users. Expect to see apps that, for a small commission, help users sell their stuff; eBay already has a ton of such apps, and they account for a large share of eBay's listings. Will this make Facebook's marketplace actually useful, though? The site's classifieds are already filled with offers for free iPhones and guides to telling if your man is cheating. If Facebook CEO Mark Zuckerberg can solve the spam problem, perhaps he'll add eBay CEO Meg Whitman to the list of prominent visitors calling on him with offers to buy a stake in his company.

By all rights, Facebook CEO Mark Zuckerberg ought to be feeling drunk with power right now. He has, I'm told, term sheets in his hands from the three giants bidding for a small piece of his startup: Microsoft, Google, and Yahoo. All three, I understand, meet his demands for a staggeringly high valuation on the company — $10 billion or more. Piled up behind them are countless offers from venture capitalists and private-equity players who would be content merely to have their funds' names attached to the untouchably hot social network. So who will Zuckerberg choose?

MENLO PARK, CA. — It's hardly a secret that Microsoft and Facebook are negotiating over the purchase of a high-valued stake in the hot social network. But why would Facebook CEO Mark Zuckerberg and Microsoft CEO Steve Ballmer be so foolish as to pick the Stanford Park Hotel as their meeting place for a final round of negotiations? The hotel, practically at the intersection of El Camino Real, the Main Street of Silicon Valley, and Sand Hill Road, the center of venture capital, is as public a spot as one could choose. And hotel-staff gossip, according to a Valleywag informant, has it that Ballmer and Zuckerberg were set to meet there this afternoon. A manager, when asked, said "important people" were meeting in the hotel's boardroom. Another source says that Ballmer was so eager to clinch the deal that he offered to head straight from the airport to Facebook's Palo Alto headquarters — an option dismissed for the more-private hotel. Oops.

Everyone wants a piece of Mark Zuckerberg's baby: Microsoft, Google, and now Yahoo, according to Kara Swisher. It's widely known that Zuckerberg, CEO of the hot social network, and his backers are asking for a high price on a small stake — selling 3 to 5 percent of the company at a valuation as high as $15 billion. But what no one seems to understand is the hold Microsoft has on the company, through an exclusive advertising deal that runs through 2011 — and how eager Facebook is to get out of that deal.

"Somewhere in San Jose, Calif., devotees of all things Facebook have gather"ed to celebrate the cult of Mark Zuckerberg and the little company he started. Dave McClure might call it his Graphing Social Patterns conference, but we all know it's all about Facebook, Silicon Valley's Furby." — Tech blogger Om Malik, on Mark Zuckerberg's toy [GigaOm]

Blog blowhard Jason Calacanis notices what we've been saying for weeks. If you write an application for Facebook and it's the least bit popular or profitable, Facebook CEO Mark Zuckerberg will take your idea and crush you. But he'll be nice while he does it. [Calacanis.com]

Mark Zuckerberg is gaining a following among entrepreneurs. BusinessWeek writes a profile of J-Squared Media — two friends who wrote the Sticky Notes Facebook app on a whim. Now they're making $45,000 a month in ad revenue and turned down a $3 million buyout offer because under the terms of the deal, they would have been stuck at the purchasing company — unacceptable for the upwardly mobile entrepreneur.

Allfacebook.com is reporting a rumor that Facebook will take on Apple's dominant iTunes by introducing its own music store. Few details are provided, save that they are actively looking to hire someone to head the project and discussions with studios have been ongoing. Music applications such as iLike are popular on the social network, and digital music is a natural fit with the site's original college-kid demographic. But could Facebook really pull this off? At this point, we don't really know what a Facebook music store would be. We do know, however, what it's not.

At 23, Mark Zuckerberg is already a conference-circuit regular — seen at last month's TechCrunch40 and again at this month's Web 2.0 Summit. But even fans ding Zuck's presence as dull, wooden and robotic. Is he shy? Nah, "He just doesn't care," says a coworker. Despite his current heavy rotation in the media, he only takes the stage when he's told it's a boost for the company. Don't believe it? Zuckerberg's not even scheduled to appear at the Facebook-themed Graphing Social Patterns conference on Sunday in San Jose. The kickoff keynote will be delivered by LinkedIn's more entertaining founder, Reid Hoffman. Aw come on, Mark. After the look-at-me antics and vain false modesty of the tech industry's quasi-celebrities, it'd be a soul-cleansing relief to come watch you stare at your shoes Adidas sandals.

Mark Zuckerberg's strategy of holding out for a Facebook valuation as high as $15 billion is contagious. Developers of the most popular Facebook applications have become mini-Zucks, unwilling to part with their astronomically self-valued creations. If Lance Tokuda, the chief executive of RockYou, sees any difference, it's only one of scale. Speaking about his companies popular Super Wall application, Tokuda, says "If you told me you were going to write me a check for $10 million, I'd say, 'Forget it.'" Why?

How leaky is Facebook? So leaky that new hires sometimes out themselves right on the company's own website, as tech expert Jonathan Heiliger has done. Heiliger, you see, revealed his new employer by joining the company's private group for Facebook employees, a move that's visible on the site. Heiliger, who, back in the '90s, used to be a 20something rock-star Internet executive like new boss Mark Zuckerberg, will be the company's vice president of technical operations, charged with, oh, say, making sure the site doesn't crash, spew private data, or leak code. By my count, that makes Heiliger the fourth vice president with "operations" in his title. But I think Heiliger, a veteran of bubble-era companies like GlobalCenter and LoudCloud, will spend more time regaling Zuck with war stories about what it was like to run a ridiculously overvalued Internet company. And he'll thereby get to relive his fading youth. What a job!

Why should Microsoft invest $300 million or more in Facebook? Apparently because Facebook CEO Mark Zuckerberg, spotted in the Seattle area earlier this week, is nicer than Bill Gates. And nice people deserve money! That's Fortune writer David Kirkpatrick's theory, anyway. [Fortune]

CAMBRIDGE, MASS. — Could it be that Sky Dayton is feeling a little lonely? EarthLink, the company he founded, refused to participate in the latest round of financing for Helio, the upstart wireless carrier he now heads. In a keynote speech at Technology Review's EmTech conference, he touted his company's service not as, say, letting you make calls and surf the Web, but "connecting you to your community of friends." So it's a social network! Ah, but a social network that requires buying a phone (as much as $295) and signing up for service ($85 to $90 a month, on average). No wonder Dayton's ersatz social network, cleverly disguised as a cell-phone company, only counts 140,000 users, and is losing hundreds of millions of dollars. Somehow I don't think Facebook CEO Mark Zuckerberg is sweating over this one.

"lame you took my song dedication off ;" — the urgent message Facebook spokesprofile Brandee Barker left for CEO Mark Zuckerberg on his Facebook profile, at 1:16 in the morning Monday, shortly before kicking off a week filled with Facebook news and rumors. [Mark Zuckerberg's Facebook profile]

FANTASY M&A —The buzz is all about Microsoft, or possibly Google, taking a stake in Facebook, the popular social network, at a lofty valuation as high as $15 billion. But the logic of those deals is driven by advertising — the more targeted, the better. But what, exactly, are advertisers hoping to target, and why? Besides crude demographics and geographies, the most logical hooks for ads are Facebook users' expressed preferences — the books, music, and movies they're increasingly listing on their profiles. And who has the best data on what consumers will buy? Why, Amazon.com, of course. The logic of a combination — a merger of the two giant databases of consumer preferences is, at least on the surface, compelling.

The Wall Street Journal is reporting that Facebook is negotiating with Microsoft to sell a stake in the hot social network at a valuation between $10 billion and $15 billion. That would net Mark Zuckerberg's company between $300 million and $500 million in cash, without Zuckerberg having to surrender any meaningful control over the company; the stake would represent 5 percent or less of Facebook. What's not clear is why a deal's happening now, save to lock in a stratospheric valuation. Some time ago, a Facebook insider called Zuckerberg "a crazy kid" for not selling. And we've said Facebook's valuation claims seemed a bit puffed-up. But given that suitors' offering prices have rocketed tenfold since then, Zuckerberg doesn't seem that crazy anymore. Instead, it's Microsoft executives, driven mad by Google and MySpace envy and determined not to miss out on the social-networking trend, who seem, well, a bit off.