There was something sweetly ironic in the not-so-veiled threat that a Microsoft-led lobbying group flashed at Google today. The message: Microsoft is learning how to turn the European anti-trust apparatus that has caused it so much grief to its own advantage.

The group in question, called ICOMP, claims to be an industry association formed to address “concerns related to online marketplaces.” Its close links to Microsoft were once less transparent, but these days it carries the following disclosure on its Website: “Microsoft is ICOMP’s initial sponsor. Burson-Marsteller [PR advisers to Microsoft] acts as its Secretariat.”

This was the group through which Microsoft directed much of its lobbying effort in both Washington DC and Brussels against Google’s acquisition of DoubleClick. So when the European Commission today published its detailed reasoning for allowing the deal to go ahead, ICOMP was quick to respond. Its most telling comment:

In its decision, the Commission identified several market segments where Google has a high and even increasing degree of market power… ICOMP will seek to help build a consensus of views as to how this will affect the market going forward and in particular what forms of behaviour may give rise to competition concerns.

Sounds familiar? That’s exactly the approach taken by ECIS, the IBM-led consortium that has been so successful in stirring Europe’s trust-busters into action against Microsoft.

Depending on how you look at it, the news that widget-maker RockYou has just raised $35m is either a sign that boundless hope continues to rein supreme in Web 2.0 financing, or that at least some degree of caution is creeping into the sector.

Like Slide, which raised $50m on a $500m valuation at the end of last year, RockYou is only just at the start of trying to work out how (if) it can make money from its little “social” applications, which users can embed into their Facebook page (as we reported before, these widgets don’t make much money yet.) The fact that RockYou has now raised more than $50m in all points to the high level of confidence that where audiences go in social media, advertisers will eventually follow.

A key question remains unanswered, though: what valuation did this latest financing round put on RockYou? There had been talk that the company had put a $400m price tag on itself and was seeking to raise much more, so the size of this round suggests it has had to scale back those expectations quite sharply.

If Carl Icahn expects Yahoo shareholders to hand him their company on a plate, he’ll have to do better than this.

The war of words with the Yahoo board that stuttered along for much of this week has looked like a naked attempt to get the issue back into the headlines. For all his blustering and supposed outrage, though, Icahn seems to have few ideas up his sleeve for what to do if Microsoft really doesn’t want to buy the company.

Challenged by Yahoo chairman Roy Bostock to say what exactly he would do if his nominees were handed control of Yahoo at the annual meeting coming up on August 1st, Icahn on Friday came up with five things:

First, I would work to have the board replace your “poison pill” severance plan with an acceptable alternative.

Second, I intend to ask our new board to hire a talented and experienced CEO (attempting to replicate Google’s success with Eric Schmidt) to replace Jerry Yang and return Jerry to his role as “Chief Yahoo”. Indeed, it was much speculated that Jerry would serve in the CEO role temporarily until a permanent CEO was hired after the board asked Terry Semel to resign.

Third, I intend to ask our new board to inform Microsoft that unless any alternative transaction can insure a $33 or higher stock price (of which I am skeptical) all talks of alternative transactions are over.

Fourth, I will ask our new board to offer publicly to sell Yahoo! to Microsoft in a friendly and cooperative transaction.

Fifth, to the extent Microsoft does not want to make a proposal, I will ask our new board do a deal on search with Google, but only if it contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.

That’s it? A promise to find the next Eric Schmidt and a partnership with Google, even though Icahn himself has not been privy to any of the discussions about the complex economic, strategic and anti-trust issues raised by the idea?

If Icahn can’t draw Microsoft back to the table with a full takeover bid, Yahoo probably hasn’t got too much to worry about from his agitation (as Rupert Murdoch suggested last week.)

How local does local have to be? That’s something the Washington Post is probably asking itself as it tries to breathe new life into its experimental local online service (we wrote about it here last year. According to this report in the Wall Street Journal today, it hasn’t been faring so well.)

The Post’s idea was a site that could get under the skin of Loudon County (population: 300,000), which lies to the west of Washington. Tapping into local advertising as it moves online could be an important business for newspapers. But it seems that Loudon is too big and disparate a place - it has five disconnected population centres and no single local identity. The Post tried to use high-end production and journalistic values to bring life to local news.

(Aside: One of the brains behind the Post’s online experimentation, Adrian Holovarty, has quit to try a different appproach at local with EveryBlock, which we wrote about here last month.)

When I spoke to Chris Tolles of Topix last week, he was pushing a very different approach (Topix is backed by three big US newspaper chains and claims 6m unique visitors a month, up from 4m a year ago.) Tolles’ recipe for drawing online users to a local news and information site is to throw any pretense at journalistic ideals out the window:

Content doesn’t need to be good, it needs to be local. If your neighbour was ranting about another neighbour, you would read it. Journalists have a hard time with this - you have to abandon controls to make it work.

Harnessing user-generated content on news sites is a difficult trick to master. The Topix approach is to create tools that make it easy for anyone to post an opinion on what’s happening in their neighbourhood, use a small amount of news to seed the conversations, and then get out of the way.

According to Tolles this works best in towns of 10,000-50,000 people, which are small enough for inhabitants to identity the town unit as their local domain - places like Welch, West Virginia and Natchitoches, Louisiana. Thanks to Topix’s overall scale on the Web, these local conversations can sometimes rise to the top of search rankings (a Google search for “news welch west virginia” brings up the Topix discussion as the first result.)

Interesting (and cheap.) But it still doesn’t answer some fundamental questions. How do you become the first place people turn to for the local conversation, rather than just one more user-generated content site gasping for the oxygen of attention? And will local advertisers want their messages to be displayed alongside this type of content - even if you could find an economic way to reach them all?

If imitation is the sincerest form of flattery, Apple’s iPhone developers must be basking in the reflected glory right about now.

Google showed off its rival Android mobile user interface at its annual developer conference in San Francisco today. A flick of the finger scrolls between pages on the mobile browser or drags items around the screen - just like the iPhone. To enlarge elements on a web page to make them easier to view, Google introduces a small magnification pane that can be dragged around by touch. All very nice - though the interface lacked the classic simplicity of the iPhone and there was no talk of when Android-powered handsets will actually hit the market.

That followed Microsoft’s demo the night before of the multi-touch UI it is planning for the next version of Windows. With two fingers, you can move images around a screen or enlarge them - or you could, if the software was available (after Bill Gates had suggested that a post-Vista Windows might come sooner than expected, Microsoft execs have been back on script this week with a promise of “no later than early 2010.”)

History also suggests that Microsoft is not a pioneer when it comes to user interfaces (this official blog post on the next Windows interface of course skips the fact that Apple was first out with a graphical UI, and who can forget the Tablet PC, which was personally championed by Gates?)

The best that can be said for the latest Google and Microsoft showings: very nice, but it’s not Apple, and it’s not available now. All of which means that when Steve Jobs returns to the stage for Apple’s developer conference on June 9th - where among other things he is expected to show off version 2.0 of the iPhone software - he will have the floor to himself.

“This is the perfect time to start a company.”

At least that is what Max Levchin had to say when I dropped by to see him in Slide’s SoMa office last week. But isn’t creating an internet company at the tail-end of the last start-up boom a disastrous idea?

This is Levchin’s reasoning. Members of the last crop of start-ups - many of them Web 2.0 companies created two-three years ago - are fast approaching their date with destiny. A slowing US economy and worsening financing environment will force those that haven’t already proven they can make money to consider a sale (we reported at greater length today on the general scarcity of revenue in Web 2.0 land and the slow start to the much-hyped “widget economy”.)

When that happens, Levchin hopes to be around to pick up the pieces. He says it was a hunch about the economic slowdown that prompted him to raise a pile of cash at the end of last year as a “warchest” for the tough times ahead. (He won’t comment on the details, but a reliable source says Slide got $50m, putting an eye-popping valuation on the widget-maker of $500m.)

The acquisition game makes sense. Slide is still early in trying to find ways to make money from its widgets, but one that Levchin says is starting to work is the use of corporate sponsorship on SuperPoke: next time you get an urge to throw a sheep at a friend on Facebook, why not send a promotion for Pimms instead? (OK, that one doesn’t sound like it would work, but you get the idea.) SuperPoke wasn’t Slide’s idea: it was started by three young developers in Seattle but Levchin bought it when he realised last summer that it was starting to take off.

And that is apparently why it’s time to think about starting a company again. By the time the coming shake-out is over, a whole new generation will be starting to find its feet. As they say in Silicon Valley: the best time to start a new business is when things turn down.

Google understands that it has a big transparency problem. That much is clear from a blog posting today by Udi Manber, the engineer in charge of its search quality. The problem is, there is very little the company can do about it.

The problem stems from the “black box” nature of its search ranking algorithms. No one knows why some websites come out higher than others in response to certain queries, and the methodology is always changing. That creates headaches for anyone who relies to any significant degree on traffic from Google (i.e., just about every business on the Web.)

Requests for more clarity about how the company arrives at its rankings have always been brushed off with a curt “no comment”: Googlers simply say that giving any of their tricks away would help people game its system.

So it’s highly revealing that Manber felt compelled to write. He rehearses the old line about the need for secrecy, then says:

But being completely secretive isn’t ideal, and this blog post is part of a renewed effort to open up a bit more than we have in the past. We will try to periodically tell you about new things, explain old things, give advice, spread news, and engage in conversations.

“Conversations”? Google? That would really be a culture change.

The trouble is, Manber has little to say other than platitudes. He promises a peek inside Google’s “black box” but gives nothing much away.

This brings to mind something that Harvard professor Viktor Mayer-Schoenberger had to say at the FT’s digital media conference in London earlier this year. He argued that there are two possible futures for Google. In one, a stronger competitor emerges in search. In the other, an unchallenged Google comes under the sway of regulators who feel compelled to act to protect the many Web citizens who are forced to rely on its opaque rankings.

Manber’s blog post is a clear sign that Google understands the risks of being seen as an internet monopolist that has no one to answer to. Whether he can change that perception is doubtful.

There was a distinct lack of fireworks at the ”factory tour” that Google put on today to show off its search prowess. More than anything else, what came across (and what always comes across when Google engineers take the stage) is that making search work really well is difficult.

Most of the time was taken up with incremental improvements in two of the most promising areas: local search and “universal” search. These are not new, but they have the potential to greatly enhance the relevance and range of material returned by regular Web searches.

When I had a moment to talk to Marissa Mayer, vice president of search products and user experience, she concurred that most advances in quality are largely invisible to the average user, though an occasional eye-grabbing feature - such as the video links returned in universal search results - are more noticeable.

According to Mayer, around 30 per cent of Google’s search results presently fall into the “universal” category (meaning that they draw on a search of seven different sources - videos, maps, news, books, images, products and blogs.) That proportion will grow as Google works out how to return relevant blended results from these different sources for more types of query, she added.

Universal search has been talked of as the Holy Grail of the business, drawing on all types and sources of information to deliver the most relevant result. Yet to judge from what Mayer says, the real “killer app” of universal search has yet to be seen. This will come from extending search to social networks and drawing in information that is deeply personal to the user and their network of friends and contacts.

Footnote: What fireworks there were today came with the formal  launch of Google Health, a service for storing personal health records online (limited for now to the US.) This is a project that has attracted an inordinate amount of attention in the time it has been under development, but it is still hard to see it as a mainstream service for some time. Few health records exist in digital form, and while it sounds a nice idea in principle, there seem to be few incentives for now for most doctors or patients to change their behaviour.

Down at the Googleplex in Mountain View this morning to hear Google’s Marissa Mayer (pictured) talk about the state of search.

You have to feel for Bill Gates and Kevin Johnson, the man with the unenviable job of trying to prove that Microsoft can at least play on the same field as Google. Gates is scheduled to present Microsoft’s latest advances in search this Wednesday at an event that the company has been touting heavily. Johnson, in an email to employees yesterday, promised big news:

We will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model.

So there looks like more than a touch of competitive rivalry in Google’s last-minute decision to throw a “Factory Tour” to talk about the latest and greatest ideas from its own search business (more on that later as the day unfolds.)

This was Johnson’s admission in an email to Microsoft employees on Sunday:

 The fact is that we are not where we want to be in this business yet and we’ve been in this position longer than we’d like.

With Microsoft making new overtures to Yahoo over the weekend and Google strutting its stuff so publicly, it’s hard to see what Gates can possibly do this week to convince the world that Microsoft can truly succeed under its own steam in this business.

OK, so it’s an old story - around two years old, to be precise.

Still, you have to admit it’s interesting that Icahn wasn’t always as down on Yahoo’s management as he has been this week. At the time, he was putting pressure on Time Warner over its failure to do more with AOL, and pointing to Yahoo as a model of internet success. This is what he told the FT:

“Look at what Terry Semel did at Yahoo. Why has AOL fallen so far behind Yahoo and Google? It is poor management.”

He had something similar to say on CNBC a couple of months later:

“Google, obviously, is one of the great success stories of all time, but Yahoo has done a great job with Terry Semel, who incidentally, they threw out of Time Warner.”

Semel only lasted about a year and a half after that. Icahn may be a great stock market opportunist but he’s obviously no expert on the internet business (something he’s admitted himself.) That’s a good reason why, if he can’t force a quick sale to Microsoft, Yahoo shareholders would probably be better off not electing him to the board of their company.

Update: It looks like Mr Icahn’s intervention has had a remarkably quick result, though not the one he was hoping for.

Microsoft has taken the opportunity to make a new pitch to Yahoo. This time, reading between the lines, it is only trying to buy part of the company, probably its search business.

Mr Icahn is not likely to welcome a deal unless it includes a full Yahoo takeover premium: anything less would probably push the stock down from its current level.

Steve Ballmer has one other complicating factor to consider. At the time he dropped his full takeover offer,  he argued that it would be a  strategic mistake for Yahoo to shed search. So if this really is the very business Microsoft is now trying to acquire, wouldn’t the Yahoo board be justified in throwing his own words back at him?

A Machiavellian interpretation of Sunday’s events is that Microsoft has nothing to lose from making a partial bid. If it succeeds, fine. And if it all it does is hit Yahoo’s share price, that’s fine too. As Microsoft says in its latest statement, it won’t rule out making a full bid again some time in the future.