By Scott Moritz, writer

There may be more than money to consider in the Microsoft-Yahoo standoff.

Microsoft (MSFT) has given Yahoo a deadline of Saturday to accept its buyout offer (or, presumably, at least at start serious talks) or risk triggering a hostile takeover battle. Yahoo wants a higher offer — a demand that Microsoft has so far rebuffed.

But the focus on price may be missing a key subtlety behind the impasse.

One possible stumbling block might be Yahoo CEO and co-founder Jerry Yang’s role in a combined company. As displeased as Yang may be by the prospect of joining forces with Yahoo’s culturally-mismatched rival, some observers say he could be open to a leadership role in the merged Internet division.

“I’ve always believed Jerry Yang wants do something bigger with Yahoo,” as opposed to watching it dissolve into the works of a bigger company, says an analyst who has known Yang since Yahoo went public in 1996. ”He’s Jerry Yahoo, that’s really who he is.”

Yahoo has been exploring other options, including a possible tie up with the AOL division of Time Warner (TWX) and an advertising partnership with rival Google (GOOG) to help outsource some of its ads and trim costs. But almost any type of hookup between the No.1 and No.2 online ad giants seemed fraught with antitrust concerns.

Without a better offer in sight, Yang and the board will likely have to sit down with Microsoft over the weekend and negotiate. If Microsoft told Yang that he would play a top role in the combined company, it might sway the Yahoo founder, says the analyst, who did not want to be identified.

“He’s already a billionaire,” adds the analyst, referring to Yang. “What he wants is his brand to be massive. When the history of the Internet is written it will feature names like [Amazon (AMZN) chief Jeff] Bezos, [Google CEO] Schmidt, Page, [AOL founder Steve] Case. Yang wants to be there.”

Stay tuned.

By Scott Moritz, writer

The yelling phase of the proposed Microsoft/Yahoo merger got a bit louder as Yahoo (YHOO) turned in good numbers ahead of the deal negotiation deadline.

In the wake of a solid first quarter performance from Yahoo Tuesday, Microsoft (MSFT) chief Steve Ballmer said his company was standing pat on its original $31 a share unsolicited takeover offer. Microsoft has given Yahoo until Saturday to come to the table with a counter proposal, or face a proxy battle.

“We know what Yahoo is worth to us. We offered a lot of money: $44 billion,” Ballmer said in Milan Wednesday, according to a Reuters report. “If their board thinks that’s fair, great. If not, we’ll move forward,” Ballmer said.

Ballmer is likely waiting to see what Yahoo does come Saturday — the end of the three-week period Microsoft gave Yahoo to consider its options. Microsoft has threatened to start a proxy fight if the two companies fail to come to terms. This would open up an ugly process where Microsoft takes its appeal to shareholders calling for the ouster of Yahoo’s top management and key board members.

Last week, Yahoo rejected the Microsoft bid for a second time saying the proposal undervalued the company. Yahoo also held discussions with Time Warner (TWX) about a deal involving a 20% stake to be held by Time Warner in exchange for AOL and a pile of cash for share buybacks.

But many analysts and investors favor a more amicable conclusion that seems to call for a slightly sweeter offer from Microsoft, either a price higher than $31 a share or an all-cash offer.

Yahoo’s earnings Tuesday, while far from dazzling, did show that the company is not deteriorating as quickly as Microsoft may have suggested. Both companies, however, continue to lose business to Google (GOOG) a point that industry observers say makes the Microsoft Yahoo merger a growing necessity.

The trouble for Yahoo is that it must convince Microsoft to outbid itself, says Darren Chervitz analyst with the Jacob Internet Fund, a big Yahoo investor.

It’s well known that Yahoo has long been losing Net search traffic to Google. And by passing on the acquisition of Facebook last year, they’ve done little to improve their competitive position, says Chervitz.

And for its part, Microsoft has gained very little traction on the Internet. Efforts like MSN mail and .Net haven’t exactly hit any jackpots. Meanwhile, Google has expanded into Microsoft’s software domain with word processing and other office applications available to users online for free.

An even bigger threat to Microsoft is Google’s push into wireless applications. The Google-sponsored Android project hopes to create an operating system for a new generation of mobile devices, a direct threat to Microsoft’s Windows Mobile system. Microsoft can’t easily afford to miss the mobile Internet opportunity, says Chervitz.

“Yahoo,” says Chervitz, “is the only acquisition that gets Microsoft into the game.”

By Michael Copeland

On the eve of the latest and largest Internet gathering this year, O’Reilly’s Web 2.0 Conference and Expo, Forrester Research dropped a report that concludes that companies will spend $4.6 billion on Web2-related technologies by 2013. What that means for you, fellow office dweller, is that Forrester believes the world of wikis, widgets, blogs, mashups and social networks will increasingly find a way into your work life.

The emphasis won’t be entirely on internal collaboration, Forrester analyst G. Oliver Young writes, but will also offer “a fundamentally new way to connect with customers and prospects…By 2013 investment in customer-facing Web 2.0 technology will dwarf spending on internal collaboration software by nearly a billion dollars.”

In other words, you will interact with your customers and prospects the same way you do with friends on Facebook or maybe more likely with colleagues on LinkedIn, and with the same Web-based communication and tracking tools.

It makes sense that companies embrace the same easy-to use Web-based tools that we use increasingly in our social lives. Mark Benioff at Salesforce.com has been preaching that for some time now, both through AppExchange and his latest brainchild Force.com, his so-called platform-as-a-service offering. There are numerous other Web-based services including Jigsaw, BaseCamp, Yahoo’s Zimbra, Zoho, and many others that are already bring a Web2 flavor to the work world. What Forrester is arguing, however, is that for everyone who still thinks AJAX is a cleaner, and Twitter is what birds do, a lot of Web2.0 will come.

Does that mean you will be getting Twitter updates from your customers or your boss? If not actual Twitter updates, than perhaps a more corporate version that can offer the same immediacy and easy access to a list of key people. Much of the consumer Web2.0 stuff that makes it fun won’t make the leap, no doubt, but the ease of use and connectivity will.

Will it be a less exciting and dynamic Web-based world that Forrester anticipates? Clearly. What it might also be, however, is a more profitable one. And that is something that many of the Web2 startups that are piling into San Francisco at the moment will be very happy to hear.

By Michael V. Copeland

I was having lunch with Flixster CEO Joe Greenstein the other day when we came to the topic of how to monetize all these widgets that are cropping up like poppies in a Silicon Valley spring.

Flixster, for those of you who are not Web geeks or film-buffs, is an online community of more than 1 million people focused on movie recommendations and reviews. While it has its own Flixster.com site, where it has really grown over the last six months is as a Facebook application — so much so, that Barry Diller’s InterActive Corp. (IAC) was rumored to be interested in buying Flixster in a deal estimated to be worth $150 million.

Greenstein spends his waking hours thinking about ways not just to grow that user base, but also how to make money from it, and he’s got a novel idea.

One way his service — and vast numbers of other widgets out there — could monetize more easily, Greenstein says, is if there were a button embedded on a site to make small purchases. “If you want to charge for a virtual teddy bear, there’s the button, you charge 99 cents for it, and that’s it,” Greenstein says. “PayPal is too cumbersome for something like this, it needs to be really simple.”

If that 99-cent button did exist, all those Facebook and MySpace applications that now depend on online advertising would suddenly have another way of making money: by charging small amounts for small items.

Those items might be virtual goods — a digital photo of a favorite band, a simple game. The point is that it could enable an economy that has been mostly missing from the widget world. If you think charging 99 cents doesn’t add up to much, remember that the ringtone business grew to a multibillion dollar industry worldwide by charging similar amounts.

So who is best suited to introduce a simple, secure 99-cent button?

In many ways Facebook is the logical choice, and one of the worst-kept secrets in the Valley is that Mark Zuckerberg and crew are working on a Facebook “wallet.” It makes perfect sense that a next step for the Facebook platform would be to introduce a simple, universal payment scheme. Facebook has already collected credit card information on some portion of its users, so it wouldn’t take much to turn something like the 99-cent button on.

I’ll bet almost a buck on Facebook doing it, and soon. The larger question is whether Facebook’s wallet becomes the standard for the rest of the Web, or if some other, more enterprising gang swoops in with a better version of PayPal for the widget world.

What are you waiting for? Get on it.

By Josh Quittner

The idea that Microsoft would take Yahoo as its hapless partner has been discussed for years down in the Valley. But most of the folks I’ve talked to pretty much dismissed it as too wrong to contemplate. Even Microsoft, dissed by Valley Guys as not getting the Web (see previous column here), wouldn’t actually go through with it, Yahoo’s decent dowry notwithstanding.

Granted, this part of the world is unabashedly Google Country. Virtually any startup that’s hot right now (Facebook being the exception that proves the rule) is making its money in Google’s slipstream.

Microsoft (MSFT) does nothing for these people. So it’s an admittedly biased sampling. That explains, in part, why, when news of the Microsoft offer broke at dawn on the Pacific this morning, most of us awakened to hoots of derision, rather than the crowing of roosters.

The Valley view, then: Yahoo (YHOO) will be Microsoft’s AOL. Microsoft is paying too dearly for too little. When AOL and TimeWarner (TWX) merged, the Street went crazy with the wonderful possibilities that the synergy would bring: Combine AOL’s online reach with TimeWarner’s content? What a no-brainer! A no-brainer is right.

In the same way, this is a deal that smells right to the same crowd — Microsoft comes away with 30 percent of the search market and $1 billion in “cost synergies.” And, while the recession is already hitting advertising, we can assume that the online world will only benefit over time as the flow of ad dollars increases. But sniff deeper and longer, and this thing begins to be redolent of the AOL-TimeWarner “synergies” that at first appeared so sweet.

What exactly is Microsoft buying here? Technology? Yahoo has been managing a declining asset since Google invented a better way to do search, then figured out how to sell (And sell! And sell!) relevant ads against its superior results. Technologists? Talent has been fleeing Yahoo Central since Terry Semel got there — and the fact that co-founder Jerry Yang returned to get the company back on track hasn’t yet lured any of those Smart Dudes back. Nor will it: Smart techies only want to work for startups these days. And let’s not even talk about the clash of cultures that such a merger will surely create.

Nope—Microsoft is buying an empty bag. At the risk of climbing even further out on a limb here, let me make an alternative suggestion. Microsoft should move in the opposite direction: Unbundle what it already has. Get rid of everything that isn’t core! Microsoft is the monopoly provider of desktop operating systems. Guess what? It’s a great business! (Or would be if it did a better job of improving it rev to rev. Vista was a disgrace.)

Want to juice the stock price? Get rid of everything that’s unrelated to the business of improving the OS — search, xBox, Zune, etc. That OS, by the way, is quickly starting to move up into the cloud. It’ll be enough of a challenge to maintain Windows’s dominance as that happens.
It will take incredible focus and innovative thinking to maintain Windows. Don’t get distracted by Google (which, by the way, ought to get back to it’s knitting, too. Targeted search is a great business. Google (GOOG) ought to get out of everything else and it’s stock price would double.)

If we’ve learned one lesson during the past decade it’s this: Technology is changing so fast that the “synergy” that’s supposed to occur when massive companies merge simply doesn’t work. The Internet belongs to the small. Unbundle now — before it’s too late.

By Josh Quittner

Ah, Microsoft. Nothing gets the knickers of Silicon Valley startup guys more twisted than signs that the world’s largest software company is over-reaching again. The latest outrage? Some of my friends at the Valley’s best-known social networks and Web 2.0 companies are privately grousing that emissaries from Redmond are trying to “strong-arm” (their term) startups into giving special treatment to Messenger, Microsoft’s (MSFT) answer to AIM and other instant messaging programs.

The problem typically arises when a social network, say, offers its users the ability to import the list of contacts they’ve accumulated on Microsoft Hotmail.

Since the summer, my friends tell me, Mister Softie has been sending cease-and-desist letters to startups that try to do this. These nastygrams are typically followed up by a meeting with Microsoft reps, who then try a couple different approaches to get the startup to integrate Messenger into their service.

If the company wants to offer other IM services (from Yahoo, Google or AOL, say), Messenger must get top billing. And if the startup wants to offer any other IM service, it must pay Microsoft 25 cents a user per year for a site license.

If, however, the startup decides to use Messenger exclusively, the licensing “fee will be discounted 100 percent.”

Such a deal!

Or not. The standard Microsoft term sheet being shown around the Valley also instructs  startups that if they want to offer search at any point in the future, they must agree “to negotiate in good faith for a period of sixty days exclusively with Microsoft on the terms under which Microsoft may provide such search service functionality…”

Naturally–and no one is complaining this is unfair—Microsoft also demands reciprocity of contacts. They say, in effect, we’ll show you our Hotmail contacts, but you have to let your users share theirs when they sign up for Microsoft’s Windows Live services.

None of the folks I spoke to agreed to talk on the record for fear of reprisals. So I will refrain from blind quoting some of their more incendiary remarks. Well, all but one: “This is a great example of why Google is the leader in the Net ecosystem and Microsoft is not,” an angry entrepreneur (who does not work for Google) told me. “Microsoft is the anti-data-portability company.”

Google (GOOG) and Yahoo (YHOO) routinely allow users to take their contacts with them when they join new social networks. So why doesn’t Microsoft? Just who owns that data anyway?

We put the question to Brian Hall, general manager for Windows Live. “We want the user to be in control of their stuff,” he told me. “We believe strongly that it’s the user’s data, it’s the user’s choice.”

Hall said he was unaware of any Messenger tie-in being a part of a signed contract, but didn’t rule out the possibility. “I don’t know of any contract we’ve signed that has those terms,” he said, pointing out that the term sheets that are being passed around merely represent what Microsoft wants—not what it will ultimately get in each instance.

Aside, that is, from the social network Bebo, which in August announced an alliance with Microsoft that would bring Messenger in house for its users. In exchange, Bebo and Windows Live users are now able to exchange contact information to invite their friends to their respective services. (Hmmm, will Facebook—in which Microsoft is a minority investor—be next to make Messenger it’s official IM client?)

Hall did say that in situations where Microsoft was dealing with a tiny company with few users, Redmond might be looking for a more favorable deal simply because the exchange of contact lists was so lopsided.

“Let’s say you are a startup and we offer to do a reciprocity deal where you can access contacts for our 410 million [Hotmail] users and I have access to your zero users,” he said, noting that it took Microsoft 12 years to amass its enormous user database. Why should it simply allow that data to flow in one direction, without getting a little something back?

But wait a second. If I’m a Hotmail user, aren’t all the contacts I amass mine? Can’t I take my friends with me?

Hall said that Microsoft’s main concern, and the reason it sent out Big Foot letters in the first place, was security. “If you look at what a number of sites are doing, they’re asking for your Hotmail login info, They’re storing your identity, which is not a best practices [approach] for anyone’s data from a security standpoint. We want to make sure our data is kept between our users and our servers.”

The thrust of the term sheets, he said, was to create a process whereby Hotmail and other Windows Live data could be shared securely with third parties. Added Hall: “There are models for federation where you can trust other services—and that’s what we’re trying to do with our partners.”

Thats what doesn’t make sense to me. If this is such a security problem, why do Google and Yahoo let their users take their contacts with them?

Disclosure: Time Warner (TWX) is the parent company of Fortune and AOL, which competes with Microsoft via its AIM messenger service and other services.

By Josh Quittner

I can’t tell if Hasbro (HAS), the maker of Scrabble, is the smartest company in the world or the dumbest. Over 100 million sets of the game have been sold in 121 countries, in 29 different languages, according to everyone’s favorite source. What a cash cow.

So, why in the world didn’t it create a free online version? Could it have something to do with the digital rights being in flux, thanks to a recent licensing deal that assigned online Scrabble rights to EA (ERTS). If so, why oh why would it let someone else do it, and reap the rewards? But that’s just what happened when two guys from Calcutta, Jayant Agarwalla, 21, and his brother, Rajat, 26, created a knockoff called Scrabulous.

Their site launched in 2006 and quickly signed up 600,000 registered users. Not too shabby for a year’s worth of work. So the brothers launched a Facebook application in June, 2007 and the results were stunning: 2.3 million active users as of today. For those of you keeping score, the application generated 270 70 million pageviews in the past month. Not a bad deal for a two-man operation.

But all good things must come to an end, which is bad news for Scrabulous fans, and even worse for the Agarwalla Bros.: Hasbro’s trying to shut the site down. “They sent a notice to Facebook about two weeks ago,” Jayant confirmed to me. “The lawyers are working on it.”

As a recovering Scrabulous addict (actually, I have since moved on to Facebook’s harder stuff, Texas Hold ‘em), I’m devastated. But as a tech writer and life-long student of what passes for Internet economics, I’m baffled. Is Hasbro just a stupid Potato Head? Or is this a brilliant game of Stratego?

My calls to the company have so far gone unanswered. A spokesman for Facebook, who said she was unaware of what was in the works with Hasbro or Scrabulous, said, “we don’t typically comment on legal matters.”

If I were an evil genius running a board games company whose product line spanned everything from Monopoly to Clue, I might do this: Wait until someone comes up with an excellent implementation of my games and does the hard work of coding and debugging the thing and signing up the masses. Then, once it got to scale, I’d sweep in and take it over. Let the best pirate site win! If I were compassionate, I’d even cut in the guys who did all the work for a percentage point or two to keep the site running.

Perhaps that’s what will happen since both the Scrabulous site and Facebook app are still up and running. Indeed, Jayant told me that he was hopeful they’d find an 11th Hour solution. “We’re trying to work out some kind of deal,” he said. I hope so, too.

Jayant said that he didn’t exactly understand what all the fuss was about. Its ability to generate insane numbers of pageviews notwithstanding—he said some players play as many as 170 games at a time on Facebook—the application isn’t throwing off that much money. He declined to say exactly how much, pegging revenues at “over $25,000 a month.” Hmmmmm.

The brothers got the idea for Scrabulous after becoming Scrabble freaks a few years ago and playing at another free site, Quadplex. After it started charging users, however, they decided to build their own “without thinking through the legal aspect at the time.”

Jayant pointed out that there are a number of other Scrabble knockoffs online. “I’m not sure why Hasbro actually picked on this,” he added. Because, dude, you’re the best.

By Stephanie Mehta

In his first-ever keynote address at the Consumer Electronics Show Tuesday, Comcast  CEO Brian Roberts seemed to be saying content is king. (Not what you’d expect from the nation’s largest distributor of pay television.)

Roberts, who was joined by radio personality and “American Idol” host Ryan Seacrest for part of his speech, told the Las Vegas audience Comcast (CMCSA) is embarking on a strategy to make a vast library of professionally produced video content available through its “on demand” channel. “Project Infinity plans to give consumers the best and most content they will find on demand anywhere — more HD, more sports, more movies, kids’ programs and network TV,” Roberts said.

The announcement was a shot at satellite television operators DirecTV (DTV) and Echostar (SATS), which have been pledging to deliver 100 channels in high definition. (DirecTV says it now broadcasts some 85 national channels in high def.) Comcast doesn’t offer as many so-called “linear” channels in high-definition, so it isn’t surprising Roberts is touting new two-way technology that will enable it to deliver high-definition video programming on demand.

In addition, Roberts said the company was boosting its library of movies on demand (not necessarily all of them in HD).

Comcast also announced the launch of Fancast.com, a website aimed at helping consumers find, organize, view and even purchase video entertainment. The site is a sort of mash-up of entertainment database IMBD.com, online retailer Amazon, TVGuide and some of the fun, Web 2.0 apps one can find on Facebook.

One reason Roberts might be emphasizing content is because the distribution business is out of favor with investors right now. Comcast’s stock is trading near its 52-week lows, as are the stocks of Charter Communications (CHTR) and Time Warner Cable (TWC), which, like Fortune, is controlled by Time Warner (TWX).

In a recent interview, Roberts explained how cable can keep rivals from the satellite and phone businesses at bay. Content was the last thing he mentioned, but clearly programming is not an afterthought. “We have to innovate, have an open architecture and interoperate between cable companies, and our customer service has got to continue to reach new levels of excellence,” Roberts said. “We also have to have the most content, which we clearly do. Put together, we have a winning strategy.”

By Josh Quittner

Hayden Black was thrilled—initially—to see traffic start to spike as his online-only sitcom, “Goodnight, Burbank,” found a fan base on Facebook. Then, he tells me, not so much: “Many people erroneously think that the success of your show is determined by how many people go to your website. But watching video on the Internet is an animal in and of itself.”

The problem was that Facebook fans like to stay put on Facebook. Instead of going to blip.tv — the video site that hosts “Goodnight Burbank” and sells ads on its behalf — Facebookers used video-viewing applets to stream the show back to the social network. That may have been good for the series’s popularity, but generated exactly zero income for Black.

So with his latest venture, “Abigail’s X-Rated Teenage Diary” Black built his own social network around his video content. It launched earlier this week. Or rather, he used Ning, the white-label service that lets anyone create a social network. “How do we bring people in? How do we fight the challenge of getting them to leave Facebook for a moment?” Black asks. “I think the best way is to use what Ning is doing — a social network in a box.”

A number of online TV companies are doing the same thing.  Social networks on Ning support, or will soon support, video programs like NextNewNetworks’ “Epic-Fu” and Channel Frederator; the Animation Social Network; Jason Calcanis’s “Maholo Daily” and the popular video podcast “TikiBar.”

This makes a lot of sense to me. We live in a media world; we are awash in the stuff. We define ourselves by the media we choose to consume — that’s partly why people prominently display the books they’ve read. We carry around like flags the magazines we love, and buy “The Sopranos” on DVD because we want to physically possess it. It’s actually kind of shocking that HBO never thought to start a Soprano’s social network.

Of course, none of this is lost on the hungry folks navigating the edges of new media.

Some bigger sites, such as Funny Or Die, are even building out their own in-house social networks. Mark Kvamme, the VC from Sequoia Ventures, which funded the Will Ferrell-backed comedy video site, says that funnyordie.com uses the same platform technology as sister sites mybluecollar.com and skateboard king Tony Hawk’s shredordie.com. Kvamme calls this the “Or Die Network” and says that it will be launching three to five new celebrity-affiliated video sites over the next six months. “We’re building a platform to partner with creative folks to give them best-of-breed web technologies to help them communicate,” he tells me. “We’re baking in our own social networking features.”

Kvamme says that building a social network around a video site is a no-brainer from a viewer standpoint.  “These audiences want to connect and communicate. They want information. We have thousands of people on the newsfeed looking for new videos coming out.”

While Funnyordie had 3.5 million unique visitors in November, Kvamme says it’s yet to turn a profit. “We haven’t figured out how to monetize Internet video yet.”  But social networks, which can demonstrate to advertisers user engagement, among other things, could solve the problem. Kvamme predicts that within five years, “Internet advertising will surpass broadcast television.”

Jeff Macpherson and Tosca Musk live in Vancouver and produce “TikiBar,” an online series about cocktails and the bachelor life. They started their video podcast nearly three years ago as a hobby, and it quickly ramped up into a real business. Currently, each episode is downloaded around 500,000 times a month.

A social network, says Musk, “allows us to really communicate with the audience. Fan scripts and art and music would be e-mailed to us all the time, and very little of it was used. It just sat there doing nothing.” With the launch of the TikiBar network on Ning (still in beta), however, fans can create their own pages and share all that stuff. “Forums are a kind of limited way of expressing oneself,” says Macpherson. “They’re limited to straight, linear text. The social network is a less linear experience — it doesn’t feel like you’re looking at a database of messages. You have your own page, music, photos, documents, and even sets of icons the user creates. It really feels like it comes to life.”

By Josh Quittner

Why did Penthouse Media Group plop down $500 million for a bunch of social networks owned by Various — including the X-rated AdultFriendFinder?Because it’s so “sticky,” Penthouse CEO Marc Bell told Fortune Wednesday. He wasn’t being gross.

We’ve been working on this transaction for about one year, he said, pointing out that AdultFriendFinder had been on Penthouse’s radar forever, but more prominently in recent years as it became the largest adult site in the world.”If you’re going to buy something, why not start with the largest?” he said.

A social networking site is a perfect complement to Penthouse’s content, he added, because, “you create a sense of online community. It’s much more sticky than just serving up content to people. With social networking you now have a user interaction that you can’t get otherwise.

Indeed, 1.2 million of AdultFriendFinder’s members pay on the order of $25 a month for “premium” services on the social network. The privately held company claimed $200 million in annual revenue and reportedly averaged 40 percent growth for the past decade. In all, Various will add $340 million in revenue to Penthouse, making it the largest porn company in the world.

The porn business has aways been at the forefront of the technology industry. So it’s not surprising then that AdultFriendFinder was launched 10 years ago by a Stanford-educated PhD in engineering named Andrew Conru — around the time that Facebook’s Mark Zuckerberg was in middle school. It was one of many social networks — including a religious dating site called bigchurch.com — that Conru built out, and collectively called Various.

Bell said that Penthouse plans to keep all of Various’s social networks intact. “We picked up a slew of traditional dating sites that have nothing to do with adults,” he said. “We’re not selling anything at this point.”That said, the acquisition of AdultFriendFinder will help Penthouse conquer what Bell calls the next great porn frontier: adult-oriented social networking on your cellphone. “We have some very interesting applications,” he chuckled, declining to elaborate.