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START Over the first three quarters of 2008, Digg lost $2 million on revenues totaling $6.4 million. We think that's pathetic, but only because with 30 million monthly uniques and a raft of publishers surviving on its downstream traffic Digg shows us so much promise. So we at Alley Insider decided to do something about it and announced the Fix Digg's Miserable Business Contest. For a prize, we'll insist Digg CEO Jay Adelson and Digg founder Kevin Rose consider our winner for Digg's vacant VP of US ad sales post. No promises, but we're pretty sure Jay and Kevin will open our email. Below are the five models we've chosen as finalists. Click through to read them and then vote for the model you think will work best.

• The sell sponsored posts and actually profit model.
• The old-school frame the Internet like AOL model.
• The there's no way an automated site needs 80 employees model.
• The "white label" it and find corporate suckers model.
• The copy and paste half-the-article like the Huffington Post does model.

Online Surveys & Market Research See Also:Announcing The Fix Digg's Miserable Business ContestDigg's Miserable Business

Finally, it looks like Microsoft is starting to fight back. In an email to journalists, the company is talking up the "Apple tax," the premium Mac-buyers pay for an Apple (AAPL) computer over PCs running Windows with similar parts. It's odd that among the tech set, Microsoft is still seen as the all-powerful empire while Apple are the plucky rebels. But compare the two companies' ad campaigns: Those Mac vs PC ads with Justin Long have been kicking Microsoft in the shin for years now. And what have we seen from Microsoft in 2008? Lame endorsements from Jerry Seinfeld? The "I'm a PC" campaign to convince people it's OK to buy Windows? An apologetic "we're better than Apple has made us out to be" Mojave Experiment? We're hoping the latest "Apple tax" salvo represents a Microsoft finally confident in its own products, Microsoft on a war footing. Windows machines are cheaper than Macs, and there's nothing wrong with competing on price, especially amidst a recession. We'd like to see Microsoft go further in its attacks on Apple. Bring out testimonials from Mac users who've suffered through Mac "spinning beach balls." Talk up how there's so few games for Mac that outlets like Gamestop (GME) don't even have Mac sections. Lambast the lack of a Mac native right-click function. And price price price, in this economy always mention price. You might not notice it beneath Justin Long's slacker smile, but Apple declared war on Microsoft. Time for Microsoft to fight back. See Also:Microsoft's Real Problem: The Second Coming of AppleSeinfeld's First Microsoft Commercial: Not FunnyMicrosoft Runs Out Of Celebrities, Crowdsources Latest Commercial

Yes, the economy sucks. But this too shall pass, and when it does, the Internet is where you want to be. In a nutshell, that's what Barclays' Doug Anmuth reminds us today, with his "2009 Internet Trends / Things To Watch For" report. First, the obligatory up-and-to-the-right long view: Internet activity continues to increase as the medium plays a more significant role in people's lives, and this increased usage and dependence should leave Internet companies well-positioned when the macro environment improves. Then Doug gets specific:

• Both Yahoo (YHOO) and eBay (EBAY) are "at a crossroads" and need to make major strategic decisions over the next year. [How about over the next month? And when will eBay finally sell Skype? Can't be soon enough]

• Microsoft's (MSFT) search will grow. The company, with an anemic share of the search market, needs pre-install toolbar deals so badly with Dell (DELL) and HP (HPQ) it will likely outbid Google (GOOG) in negotiations with PC makers, boosting share a few percent. [Agreed that Microsoft will buy share. And the implication is this: Distribution and incremental growth will get more expensive for Google, too. This will put pressure on margins. Ultimately, however, Microsoft won't inflict real damage unless it is willing to do bad economic deals forever.]

• The crummy economy will put pressure on e-commerce margins, but as companies like Circuit City (CC) go bankrupt, e-tailers like Amazon (AMZN) will pick up the slack. [Pleasant thoughts, but stocks rarely go up when margins are declining, no matter what's happening with share.]

• Large Internet companies will continue to acquire smaller companies -- but they'll do it cheaper than before. [Yes. But their own currencies will also be deflated. Cash flow will certainly be a major advantage here.]

• More cost-cutting, more ad network consolidation, and a smaller advertiser base. [Translation: Dozens of ad networks will either go out of business or sell at firesale prices. Display advertising across the industry will drop at least 10%.]

What gets Doug most excited about 2009? "The Obama Effect.": Obama's broadband build-out and general comfort with technology will "positively impact overall Internet usage, thereby benefitting e-commerce and Internet companies overall."

Another $7 million for startup Xobni ("inbox" backwards), which just completed a Series B with new investor Cisco (CSCO), and additional funding from prior investors Khosla Ventures, First Round Capital, Baseline Ventures, and Atomico. Xobni's service is to make Outlook email searchable by keyword -- which sounds to us a lot like making it more like Google's (GOOG) Gmail. But many enterprises continue to avoid web-based email -- citing privacy, reliability, or legacy reasons. See Also:Ex-Googlers Launching Startups To Attack Mother ShipGoogle: Actually, Gmail Doesn't Suck

No phishing scam here: Someone broke into Twitter's back-end tools and tinkered with 33 accounts, including Fox News, Rick Sanchez, Barack Obama, and Britney Spears. From Twitter's blog: The issue with these 33 accounts is different from the Phishing scam aimed at Twitter users this weekend. These accounts were compromised by an individual who hacked into some of the tools our support team uses to help people do things like edit the email address associated with their Twitter account when they can't remember or get stuck. We considered this a very serious breach of security and immediately took the support tools offline. We'll put them back only when they're safe and secure. Earlier: Fox News' Twitter Hacked, Says Bill O'Reilly Is Gay

Well, John McCain lost his bid for the presidency, meaning former eBay (EBAY) CEO Meg Whitman won't be Secretary of the Treasury. (Whew!) But Meg's political ambitions didn't die with alongside the McCain campaign. As has been long rumored, it looks like Meg will be running for governor of California. Meg today stepped down from the boards of Procter & Gamble (PG), eBay, and Dreamworks Animation, her spokesman tells the WSJ. No hard confirmation yet -- Meg's handlers insist the move is "for personal reasons." But it's hard to imagine what else it could be. See Also:So, THAT's What Meg Whitman Has Been DoingMcCain: I Would Make eBay's Meg Whitman Treasury Secretary

Verizon Wireless will overtake AT&T (T) as the biggest U.S. wireless carrier by Friday, the date that's scheduled to be the final closing date of its $28.1 billion acquisition of Alltel. With Alltel's 13 million subscribers, Verizon (VZ) will have more than 80 million subs. AT&T had about 75 million wireless subs at the end of September. (We understand that Verizon will have to divest some subs -- about 2 million. But it should still have the lead.) What's in it for Verizon? Besides bragging rights, more revenue -- especially from mobile data, and potential RIM (RIMM) BlackBerry Storm subscribers, potentially more favorable treatment by equipment vendors. These include cellphone makers, which could conceivably choose Verizon for exclusive phone launches over AT or back-end gear makers, which might give Verizon cheaper pricing based on additional scale. See Also:Why BlackBerry Storm Is "Hot": Verizon Subs Have No Choice (RIMM)Verizon: BlackBerry Storm Return Rates 'Lowest' Of Any Smartphone (RIMM)Sprint Nextel Still Winning The Mobile Internet Wars

There's only a few hours left to vote for your favorite startup/tech companies/people in this year's Crunchies voting. Vote here now. The Crunchies are an annual Oscars-for-startups show organized by TechCrunch. We're a media partner this year. Categories include best technology achievement, best bootstrapped startup, best founder, etc. The "best overall" category includes Amazon (AMZN) Web Services, Facebook, Google (GOOG) Android, Hulu, and Twitter. Some tickets are still available for the awards ceremony and after party this Friday evening in San Francisco. Buy tickets here.

More progress in the race to hook your TV up to the Internet: Tiny set top box maker Roku will add Amazon (AMZN) streaming movie rentals to its $99 digital video set-top box. Until now, the device only played movies from Netflix's (NFLX) streaming service, which required a Netflix subscription. This is a good move by Roku, and will likely benefit Amazon (though not materially). It also puts pressure on Apple (AAPL) to improve its Apple TV set-top box, which Apple CEO Steve Jobs still describes as a "hobby." Besides the obvious -- cutting its price -- what do we think Apple could to to make Apple TV more attractive? As we've said before...

• Add a DVD and/or Blu-ray player. Even if the gadget's main purpose is for Internet video, it needs to replace something in our living room. Our old DVD player is ready to get swapped out. (Yes, people are still buying DVD players -- they're projected to significantly outsell Blu-ray players this year.)
• Open it up to more Internet video beyond iTunes and YouTube. Sites like Hulu, MLB.TV, ABC/NBC/CBS/Fox, or any Flash/Silverlight-enabled video on the Web. Apple's goal here is to make money selling gadgets -- it barely profits from iTunes sales. So let's make the Apple TV more attractive, even if it costs iTunes a little.

Last year at Macworld, Steve Jobs announced Apple TV movie rentals, which helped. We're hoping his colleague Phil Schiller has more Apple TV announcements to make during his Macworld keynote tomorrow, too. We'll cover the event live -- check back for more tomorrow beginning at 12 noon ET. See Also:Steve Jobs: We Still Haven't Figured Out The Living RoomNetflix Streaming To Be Built Into TVsVudu Slashes Price On Movie Streaming Box, Toast Anyway?

Yale corporate governance expert Stephen Davis thinks Apple (AAPL) should have been more forthright about Steve Jobs' illness. He also describes the tone of the last line of Steve's note today as "dismissive" of shareholders' legitimate right to understand what's going on. WSJ: Stephen Davis, a corporate-governance expert at Yale University's School of Management, doesn't think [Apple disclosed enough about Steve Jobs' health problems]. "This involves obviously millions of investors - it's not just the health of one person at issue here, it's the financial health of millions of investors and obviously millions more consumers," says Mr. Davis. Mr. Jobs' letter, released this morning, said he had "a hormone imbalance that has been 'robbing' me of the proteins my body needs to be healthy." The letter comes after months of speculation about Mr. Jobs' health amid his big weight loss. But Mr. Davis doesn't think it fully resolves the questions. "Apple has a culture of releasing information in dribs and drabs, and this is another example of that - there seems to be sort of a feeling that [shareholders] don't necessarily require or deserve timely and regular disclosure about top management," says Mr. Davis. Mr. Davis didn't find the description of the medical condition sufficient. "A 'hormone imbalance' is not something I'm familiar with, so it seems to me it would have been helpful for the company to provide some full background on what does that mean," says Mr. Davis, who is a senior fellow at Yale's Millstein Center for Corporate Governance and Performance. "It seems altogether mystifying." Mr. Davis sees the last line of Mr. Jobs' letter as salt in the wound. Mr. Jobs wrote: "So now I've said more than I wanted to say, and all that I am going to say, about this." Says Mr. Davis: "What would have been reassuring would be a statement saying, 'As soon as we know anything further, we'll let our [shareholders] know.'" As it is, "it's dismissive of shareholders' legitimate need to know what's going on," Mr. Davis says. See Also: Once Again, Apple Not Forthright About Steve Jobs' HealthSteve Jobs Admits Health Caused Him To Skip Macworld

Another "crackdown" in China: This time, it's Chinese censors declaring a new campaign against Internet "vulgarity." In the cross-hairs are search engines like Baidu (BIDU), Google (GOOG), and 17 other firms for linking to off-color content. Chinese state TV showed officials hauling equipment out of an unnamed office. Offenders face "stern punishment," says China's "State Council Information Office" Cai Mingzhao. (That's the same Cai who made China's censorship policy plain to Wikipedia's Jimmy Wales in an October meeting.) It remains to be seen whether the Chinese TV reports of equipment being seized amounts to anything significant, or if it's just stock footage to scare the companies involved. But an oddly reassuring feature of today's censorship raid is that China didn't pick any one company with poor political connections: The Chinese government seems to have targeted the entire sector with equal treatment. That's progress! See Also:Reversing Policy, China Arrests Windows PiratesJimmy Wales Meets Up With China's Internet Censors, Doesn't Discuss CensorshipMicrosoft: Piracy Makes China An Irrelevant Market

Updated: Not related to this weekend's Twitter phishing scam -- Fox News' Twitter account has been hacked:

That was quick. Earlier this morning a report circulated saying Sony (SNE) was planning additional cuts and restructuring that would kill many of the firm's "sacred cows" -- particularly those prized by Sony Japan -- as CEO Sir Howard Stringer struggles to enforce his rule over the Japanese company. Now Bloomberg quotes Sony spokesmen in Tokyo saying 'we are not planning to announce further restructuring at this time.' It's time for Sir Howard to step up to the plate: There's a crisis of confidence in Sony's vision. The Times (UK) basically accused the CEO of not really being in control of the company's Japanese operations, and now Tokyo-based spokesmen are telling Bloomberg that he isn't. Only Sir Howard himself can now convince people he's in charge -- assuming he is. See Also:Sony To 'Slay Sacred Cows'...So Are PS3 Price Cuts Coming?

The sad state of Blu-ray: Despite much hype and (finally) shrinking price tags, last decade's technology is still winning. NYT: The Consumer Electronics Association predicts that North American consumers will spend $1.3 billion on Blu-ray players in 2009, outpacing the projected $1.2 billion that will be spent on regular DVD players, although Blu-ray players are two to three times more expensive. That means that DVD players -- which many of us have spares of, collecting dust in closets -- will still significantly outsell Blu-ray players this year. The question: Whether Blu-ray player unit sales will ever outpace DVD player sales, or whether via cable and gadgets like Netflix-capable TVs, consumers will favor Internet-based movie consumption instead. Telling: Even Sony (SNE) is starting to think about life after/instead of Blu-ray -- it's advertising its PlayStation3 as a "movie downloading machine" -- instead of as a Blu-ray player. See Also:Blu-ray, Cut Prices Or You're ToastDVD Sales Down, Blu-ray Trends 'Encouraging'Blu-Ray Players Finally Cheap. Will Anyone Care?

Last summer, we met 'Helvetica' director Gary Hustwit at a NYC book reading and were thrilled to hear about his newest project, 'Objectified', a documentary about industrial design due this spring. As Gary explained: "It's a look at the creativity at work behind everything from toothbrushes to tech gadgets. It's about the people who re-examine, re-evaluate and re-invent our manufactured environment on a daily basis." Among his subjects: Jonathan Ive, the British-born designer who's the SVP of Industrial Design at Apple (AAPL) and one of the brains behind the iMac, the iPod, and the iPhone. Here's the trailer, released today. Higher quality, non-fullscreen-able version at Gizmodo. See Also: 'Helvetica' Director Gary Hustwit's Next Film: Industrial Design Documentary

The headline news is that Steve Jobs is sick and that's why he isn't giving a keynote at Macworld. One interesting side note is that an online media outlet most people would call a blog got the story right and a reliable old media brand did not. Here's what CNBC's (GE) Jim Goldman reported after Apple announced Steve Jobs would not give the keynote: Sources inside the company tell me that Jobs' decision was more about politics than his pancreas. Sources tell me that if Jobs for some reason was unable to perform any of his responsibilities as CEO because of health reasons, which would include the Macworld keynote, I should "rest assured that the board would let me know. Based on Steve's letter today, the "politics" explanation appears to have been bogus (or at least secondary). And no one was asking whether Steve Jobs was suddenly too sick to be CEO--the question was why he had decided to pass on MacWorld. Then, a few weeks later, Gizmodo, Gawker Media's gadget blog, reported that a source who " has repeatedly been 100% correct before" told them that Jobs was skipping Macworld due to his health. Based on Steve's letter, this appears to have been accurate. CNBC's Goldman, however, immediately got on TV and said Steve was "totally fine": I spoke to Apple after these headlines crossed and the company, which officially doesn't comment on rumors, reiterated the reasons it offered two weeks ago: Apple was pulling out of Macworld because the company didn't see the need to continue its investment in the expo, which included Steve Jobs' keynote. If that was Apple's official explanation, it appears to have been a lie. In any event, Goldman's source was wrong. We don't mean to single out Jim on this one (most major media got the Macworld explanation wrong or punted on the question). But it is worth noting that one of traditional media's self-professed differentiators over "blogs"--that traditional media has actual sources--continues to erode. See Also:Steve Jobs Admits Health Caused Him To Skip Macworld

How do you fix Sony (SNE)? The Times (UK) reports that we'll soon see a radical restructuring of the firm with "a series of 'sacred cow-slaying' measures [analysts] believe will abolish or fundamentally alter many of Sony's long-established business practices." That's on top the personnel cuts of 8,000 and 30% divestment from Sony's electronics business announced just last month. The thrust of the Times' story was that Sir Howard Stringer, the British (and first non-Japanese) CEO of the company, needs to be "given free rein to take on the company's old guard" and overcome "a clear internal cultural clash between Japanese Sony and its US and European operations." No argument here. A CEO without the power to make tough choices in the best interest of a company and its shareholders is no CEO at all. But while consolidating plants and redrawing org charts may seem to be "sacred-cow slaying" in Sony's boardroom, here's some more Sony "sacred cows" we'd like to see slayed:

• Price cuts to the PS3. We understand Sony needed to deny there might ever be a PS3 price drop ahead of the Christmas season, lest it deter sales. But the holidays are behind us and Sony needs aggressive pricing to keep the PS3 relevant in 2009.
• A ground-up overhaul of coordination between Sony's divisions. Apple's (AAPL) iPhone does music, games, cell service, and e-reading. Sony dabbles in all of these areas, but as far as we can see Sony's units act like independent, non-cooperating fiefdoms.
• Cut unproductive product lines. Units like the Sony Walkman Video MP3 player seem like nothing more than nostalgic odes to Sony's faded dominance in portable music. Either compete to win or don't compete at all.
• Turn the PS3 into a content-delivery vehicle AND go one better and also partner with other sites as Microsoft's (MSFT) Xbox does with Netflix (NFLX). Sony needs to realize its PS3 opportunity is having a high-performance network device attached to millions of TVs--not Blu-ray, which is gravy.

See Also:More Humiliation For Sony: PS3 R&D Funds Helped Build The Xbox Sony's PS3 Cost-To-Build Falls 35%. Pass On The Savings! Sony PSP2 Rumors Bogus, No New Handheld Gaming Gadget ComingSony's PS3 A Sinking Ship: Sales PlummetSony Firing 8,000

Apple shows why investors were right to be skeptical about its rosy dismissals of concerns about Steve's health--because they were b.s.

Apple (AAPL) sources told CNBC's Jim Goldman (over and over) that the reason CEO Steve Jobs would not give his usual keynote at this year's Macworld was for "political" reasons. Now, in an open letter, Steve suggests that this is not the case, writing that his startling weight loss has been due to a hormone imbalance. "A few weeks ago," Steve said, "I decided that getting to the root cause of this and reversing it needed to become my #1 priority. " He writes: "I will continue as Apple's CEO during my recovery." In our opinion, this means that, once again, Apple has not been forthright about Steve's health. Steve's letter: Dear Apple Community, For the first time in a decade, I'm getting to spend the holiday season with my family, rather than intensely preparing for a Macworld keynote. Unfortunately, my decision to have Phil deliver the Macworld keynote set off another flurry of rumors about my health, with some even publishing stories of me on my deathbed. I've decided to share something very personal with the Apple community so that we can all relax and enjoy the show tomorrow. As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors. A few weeks ago, I decided that getting to the root cause of this and reversing it needed to become my #1 priority. Fortunately, after further testing, my doctors think they have found the cause -- a hormone imbalance that has been "robbing" me of the proteins my body needs to be healthy. Sophisticated blood tests have confirmed this diagnosis. The remedy for this nutritional problem is relatively simple and straightforward, and I've already begun treatment. But, just like I didn't lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple's CEO during my recovery. I have given more than my all to Apple for the past 11 years now. I will be the first one to step up and tell our Board of Directors if I can no longer continue to fulfill my duties as Apple's CEO. I hope the Apple community will support me in my recovery and know that I will always put what is best for Apple first. So now I've said more than I wanted to say, and all that I am going to say, about this. Steve Here's a statement from the Apple board: CUPERTINO, Calif., Jan. 5 /PRNewswire-FirstCall/ -- It is widely recognized both inside and outside of Apple that Steve Jobs is one of the most talented and effective CEOs in the world. As we have said before, if there ever comes a day when Steve wants to retire or for other reasons cannot continue to fulfill his duties as Apple's CEO, you will know it. Apple is very lucky to have Steve as its leader and CEO, and he deserves our complete and unwavering support during his recuperation. He most certainly has that from Apple and its Board. 2009 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS and Macintosh are trademarks of Apple. Other company and product names may be trademarks of their respective owners. See Also:So... Apple Lied About Steve Jobs' Health--AgainWorld Ends: Steve Jobs Not Giving Keynote At MacworldSteve Jobs' Health Is Everyone's Business

Here's what the rumors say we can expect to be announced from Apple (AAPL) during Macworld 2009:

• A new 17-inch, unibody MacBook Pro with an irremovable battery.
• A (Product) red iPhone.
• New versions of iLife and iWork, but in the cloud.
• An updated Mac Mini.
• New displays.
• A 28-inch iMac.
• A super-duper Apple TV, home server type thing.

See Also:Consumers Plan To Ignore CES, Macworld And Gadgets In 2009