Yahoo mum on Microsoft, but hints at Digg rival

Updated at 1:30 p.m. PST with Microsoft comment

PHOENIX--Yahoo executives speaking at an online ad conference on Monday were mum on Microsoft's takeover attempt, but were quick to tease a new feature, due out this week, on their home page--a feature that could be their rumored competitor to social news aggregator Digg.

In his first public appearance since Yahoo's board snubbed Microsoft's takeover bid, Yahoo Chief Executive Jerry Yang gave the keynote speech at the Interactive Advertising Bureau's annual meeting in Phoenix. Yahoo President Sue Decker came with him to talk about the company's advertising business.

"Obviously I think we can't say a whole lot about the (attempted acquisition) process we're going through. Everybody has read about everything we're doing so there's not much more to add," Yang said when asked during a question-and-answer session following his keynote speech.

Yang said he has been spending a lot of time with the board and "key constituents" discussing the proposal, and executives want to make sure that "where Yahoo goes is the right place" for customers, employees, and shareholders.

"We're taking this proposal Microsoft has submitted to us very seriously. We've made a public statement about why we have not accepted the proposal given that it undervalues" Yahoo, he added. "It's been a galvanizing event for all of us at Yahoo...I think Yahoo is a very unique asset. I'm a little biased."

Relying on the same talking points, Decker said the Microsoft move had been a "galvanizing force and a catalyst" for the company, and admitted that the company had spent the past few years playing "catch up" on its search algorithm and search advertising.

Before the keynote address, Yang casually talked to attendees about becoming a father again (his wife is pregnant with a girl) and telling CNET News.com that he couldn't comment on the Microsoft situation.

Meanwhile, Decker was suffering from a cold, a Yahoo spokesman said later. That would explain why she seemed out of breath during the keynote and coughed loudly during the Q&A session.

Digg rival due this week?
Decker did light up when talking about innovative products Yahoo is working on in the shadow of the Microsoft takeover bid.

There will be an announcement this week "on our home page where we have already been opening it up to third-party publishers...and refreshing it," she said. "It allows us to surface the very best content on the Web."

Decker didn't provide more details, but chances are the announcement will be related to Yahoo Buzz, a buzz tracker for items chosen by readers, similar to Digg and Reddit, but also items people search for on Yahoo and the company's network of publishers.

Decker also assured Web publishers that online ad networks and exchanges, like Yahoo's Right Media, won't commoditize ad inventory but will instead make online advertising more efficient.

"We see the exchanges as a critical part of the broader platform, driving openness and scale," she said. "If we can decrease the friction out of the process, it should only increase the yield for publishers because that creates value for marketers."

Later in the day a Microsoft executive said his company was still very excited about the possibility of merging with Yahoo.

"I don't know if I can add a lot that is new. We continue to believe it would be a great combination," Brian McAndrews, senior vice president of advertiser and publisher solutions group at Microsoft, said in a Q&A session. "Combined, we will be able to compete much better with Google."

Asked to comment on concerns that combining the second and third players in the search advertising market would create a duopoly with too much control in too few hands, McAndrews said that would be better than a monopoly. "You want two; you don't need more than two," he said.