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Facebook has announced the hiring of Sheryl Sandberg, previously Google’s Vice President of Global Online Sales & Operations, as COO. Sandberg will start at Facebook March 24.

Sandberg spent six years at Google where she built and managed Google’s online sales channels for both AdWords and AdSense. Prior to Google, Sandberg was Chief of Staff to the U.S. Treasury Secretary under President Bill Clinton.

Sandberg’s appointment will strength Facebook’s sales efforts at a time the company is focusing on turning a profit from its growing traffic base.

According to Facebook, Sandberg will “be responsible for helping Facebook scale its operations and expand its presence globally. Sandberg will manage sales, marketing, business development, human resources, public policy, privacy and communications and will report directly to Facebook’s CEO Mark Zuckerberg.”

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Sources have indicated to us that Yahoo has scheduled a special board of directors meeting on Friday to determine, effectively, the fate of the company. After a week of hectic negotiating, it’s clear that no one is going to step in with a competing acquisition offer to what Microsoft put on the table last Friday - $31 per share. Softbank, the last real chance for a competing bid, bowed out today and said they would not be challenging the Microsoft offer.

There are only two options left. Accept the offer in principal, and try to increase the price with no negotiating leverage at all, or do a deal with Google to outsource search advertising and, likely, search itself.

The board, we’ve heard, is basically being told by outside advisors to take the Microsoft deal. But we’ve also heard that a contingent of senior executives at Yahoo, who are willing to do literally anything to thwart a Microsoft takeover, are pushing for the Google deal and will present their case at the meeting.

Based on our discussions with insiders and analysts this week, it’s fairly clear that the Google deal would, to say the least, not be a good choice for Yahoo in the long run. But Citigroup’s Mark Mahaney gives it a 25% chance of happening anyway, based largely on an emotional response from Yahoo to remain independent at all costs.

A Google Deal - Short Term Independence/Long Term Nightmare

If Yahoo were to outsource search to Google, the immediate upside would be 25% or so to Yahoo’s cash flow in the form of increased revenues (revenue per search query would likely jump to 9 cents from 4 cents today), and cost savings from operations (servers) and headcount reduction. That may add $7 billion or so in immediate valuation, or around $5 per share, say some experts we’ve talked to (less than half the premium Microsoft is offering).

Nearly a third of Yahoo employees would be shown the door, though. Estimates are that Yahoo employees 1,500 or so people in each of search, the search advertising platform, and advertising sales and operations. All of those employees would likely be fired, unless Yahoo chose to retain its core algorithmic search product. Experts say, however, that good search and the ad platform go hand in hand. Without data from the search advertising side of the business, search itself is hobbled. It’s likely, therefore, that Yahoo would shed all of those jobs to and simply outsource all of search and search marketing to Google. Yahoo has a little over 13,000 employees today (taking into account the recently announced layoffs) - so nearly 1 in every 3 would leave.

Those revenue estimates of 9 cents per search query, though, are based on current Google revenues. It’s likely that Yahoo could negotiate most of that for themselves to get the deal. But down the road, when it’s time to renew, Yahoo will have lost all of their leverage since there will be no one other than Google to partner with. Renewal deals won’t be so sweet.

It’s also likely that Yahoo would see a gradual decline in search volume if they were to outsource to Google (as has happened with AOL, which moved to Google search in 2002 and has dropped from 30% to less than 5% market share). Expect Yahoo to take the same hit over time.

There is also the strong likelihood that any deal reached between Yahoo and Google would be rejected by U.S. regulatory authorities. In the meantime, however, all the best Yahoo search employees will have left the company to take more stable jobs. In the event the deal was rejected, Yahoo would find itself in a nightmare, having lost scores or hundreds of its best employees and without the Google revenue. Sure they’d be independent, but their stock price could be a fraction of the $19 they saw the day before the Microsoft offer.

It’s fairly certain that Yahoo will continue to use the threat of a deal with Google to try to increase Microsoft’s offer a few dollars per share. But the threat isn’t (or at least, shouldn’t be) real, and both sides know it.

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Yesterday’s year-end data dump from the NPD Group contained many smaller stories. One was that Activision is trumpeting the fact it was the US’s top third-party publisher of console and handheld games during 2007. The Santa Monica-based publisher claimed a 17.7 percent share of the domestic non-PC game software market last year, up from 7.2 percent in 2006.

Activision gives the most credit for its success to a single franchise: Guitar Hero. Picked up for a now-bargain $100 million in 2006, the license was the top-selling property in 2007, thanks to the release of Guitar Hero II, Guitar Hero Encore: Rocks the ‘80, and Guitar Hero III: Legends of Rock. Citing NPD figures not released to the press, the publisher asserts that Guitar Hero III “was the number one title across all platforms in both units and dollars” in 2007 and the number one game in December. When all platforms are combined, the number three game for the month was Call of Duty 4: Modern Warfare from Activision-owned developer Infinity Ward.

“For the first time in our history, we were the number-one U.S. publisher for the calendar year,” crowed Activision Chairman and CEO Robert Kotick in a not-so-veiled reference to Electronic Arts. “We are well on our way to delivering 16 years of record revenue growth and by far our most profitable year ever.” During the fiscal year that ended last March, the company had revenues of $1.5 billion, but just $85.8 million in net income–aka profit–thanks to a massive investment in development.

But even as Kotick touted his company’s dominance of the console and handheld markets, preparations were being made for the union that will put Activision and the top maker of PC games under the same corporate roof. Reuters reports that in Paris, French multinational conglomerate Vivendi has secured a loan of 3.5 billion euros ($5.13 billion) to partially assist in bankrolling the purchase of its controlling stake in soon-to-be superpublisher Activision Blizzard.

Underwritten by several banks, the loan will include 1.5 billion euros ($2.19 billion) for the unrelated purchase of an Internet services provider, and another 2 billion being handed out in timed intervals. According to Reuters, Vivendi has already acquired credit lines totaling nearly 4 billion euros ($5.84 billion) to help it acquire a controlling stake in Activision Blizzard, which will have an estimated value of $18.8 billion.

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Today, while skimming over various WoW sites, I noticed two forum posts about the same topic: Players have discovered that there’s a cap on how much money you can carry in the game. Apparently that amount is 214,748 gold, 36 silver, 48 copper. After you reach that lofty sum, you’ll no longer be able to receive money from any source in the game. While some responses to the original posts claim that this exact limit had previously been theorized to exist, there have been no reports of anyone in the game actually achieving this amount via legal means.

Dorgabas on the official forums and meth on MMO-Champion’s forums both reported the discovery today, each with a screenshot to provide veracity to their claims. You can check them out by clicking here. The shots are of two different players, one of whom is on a German-speaking server. In the shot you can read his conversation with a GM, which supposedly translates to him asking the GM about the limit and the GM scratching his head in response.

You can check out both threads linked above for more information, including a rough translation of the German conversation and an explanation of why this amount is the limit due to the game’s coding.

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As Square Enix continues to develop its upcoming multi-release cash cow, some new images and not-so new details have surfaced of both Final Fantasy XIII and Final Fantasy Versus XIII. Secured from the denizens of NeoGAF, we now bring you the newest information to arise from Square’s latest dabbling in androgynous mayhem.

The magazine from which the scans are taken have some translated plot details, but it’s nothing that followers of the title won’t know already, as it talks about the floating city of Cocoon that has already been discussed by Squeenix in the past:

Built by a great entity, it is a society floating in the sky, enclosed in a “shell” — Cocoon. It flourishes, protected by the great machines and living creatures invented by the Crystal.

As the enemy of mankind, which ruins the world.

That’s all dramatic and interesting, I’m sure, but look at the CLOWN DOG! Since it’s on a page with Ifrit and Shiva, I wonder if he’s a new Carbuncle (the green around his face and the red jewel on his head makes me think of the cute healing summon). Either way, he’s bloody adorable, that’s for damn sure. On the strength of one picture of an animal wearing a ruff, I declare FFXIII and all its presumptuous spin-offs a success.

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A tipster believes Yahoo has created a list of 1,500-2,500 jobs that may be eliminated in the next two weeks. CEO Jerry Yang will reportedly make the decision to go forward with these layoffs–or not–next week. Jerry reportedly wants to announce the cuts with or before earnings (January 29th), but may not make them if the stock price recovers.

We believe Yahoo should reduce headcount by at least a thousand people, and others are looking for cuts of more than twice that. Yahoo’s stock has recently hit new lows, almost all of its key businesses are losing ground to Google, and shareholders are beyond frustrated. Jerry Yang, moreover, is perceived as a good guy who is unwilling to make the hard-ass decisions necessary to get Yahoo heading in the right direction again–a perception he is presumably eager to dispense with. Lastly, a recession is on the way.

All of these factors make a cut of this magnitude quite plausible. We believe the stock market would react favorably to it.

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Ever since John Riccitiello took over last year as chief executive of Electronic Arts, the video game industry bellwether, he has promised to revitalize the company with new games and new ways of reaching consumers. Now, that may be happening.

In a major departure from its traditional business model, E.A. plans to announce Monday that it is developing a new installment in its hit Battlefield series that will be distributed on the Internet as a free download. Rather than being sold at retail, the game is meant to generate revenue through advertising and small in-game transactions that allow players to spend a few dollars on new outfits, weapons and other virtual gear.

At a conference in Munich, the company intends to announce that the new game, Battlefield Heroes, will be released for PC this summer. More broadly, E.A. hopes the game can help point the way for Western game publishers looking to diversify beyond appealing to hard-core players with games that can cost $60 or more.

E.A.’s most recent experiment with free online games began two years ago in South Korea, the world’s most fervent gaming culture. In 2006, the company introduced a free version of its FIFA soccer game there, and Gerhard Florin, E.A.’s executive vice president for publishing in the Americas and Europe, said it has signed up more than five million Korean users and generates more than $1 million in monthly in-game sales.

Players can pay not only for decorative items like shoes and jerseys but also for boosts in their players’ speed, agility and accuracy. Mr. Florin said that while most users do not buy anything, a sizable minority ends up spending $15 to $20 a month.

With Battlefield Heroes, E.A. hopes to bring that basic system of “microtransactions” to Western players, along with increased advertising. Mr. Florin said the licensing agreements around the soccer game prevent E.A. from inserting in-game advertisements from companies that are not already sponsors of FIFA, the international soccer federation. By contrast, E.A. already owns the Battlefield franchise and will be free to insert whatever advertising it wants.

The game industry is booming worldwide, largely on the strength of two trends: a demographic expansion of the gaming population beyond the traditional young male audience and the rising popularity of online play.

Electronic Arts, once the industry leviathan, has not taken full advantage of those shifts. Meanwhile, one of E.A.’s main competitors, Activision, is riding high on the strength of the mass-market Guitar Hero series and has agreed to merge with Vivendi’s games division, which makes the world’s most popular online game, World of Warcraft.

With Battlefield Heroes, E.A. is trying to capitalize on both trends at once. Not only will Heroes be distributed online, but also it is meant to provide a simpler, more accessible entertainment experience than the relatively complex earlier Battlefield games. The combat-oriented series has sold about 10 million copies since the 2002 debut of the franchise’s first game, Battlefield 1942.

“The existing Battlefield games are fairly deep; you have to be pretty good or you’ll die pretty quick,” Mr. Florin said Friday in a telephone interview from Geneva. “Now we’ve toned down the difficulty, shortened each game session to 10 or 15 minutes and made the visual style more cartoony.”

Strategically, Mr. Florin said the game was a step toward figuring out how to generate multiple revenue streams from a single intellectual property, a maneuver Hollywood has mastered.

“I’ve always envied the movie industry when they put a film out in the cinema, then they go to retail with a different business model and then to pay television and then free TV,” he said. “They have the same content reaching different audiences with different models, and we could never figure out a way to do that. Now with higher broadband penetration, we can use the technology to reach a broader audience.”

Not to mention the fact that popular games distributed online can be more profitable than games sold at retail, a prime driver of the Activision-Vivendi deal. Across China and South Korea, where online games dominate the market, game companies are generating profits far beyond their Western counterparts’ returns.

“The Activision-Vivendi deal changes the landscape for how investors will look at game companies, and that puts pressure on everyone else,” Ben Schachter, an Internet and game company analyst at UBS Securities, said Friday.

“Before it was a battle for a few operating margin points here and there,” Mr. Schachter said, “but when you look at the Asian companies like Shanda or something like World of Warcraft, you talking about a 40 percent operating margin business, which is just in a different league from the U.S. companies. So the U.S. publishers like E.A. have to be looking at those models with envious eyes, and those companies will have to experiment.”

Mr. Florin declined to name names but did say that if Battlefield Heroes is a success, E.A. would soon look to create free downloadable versions of some its other marquee games as well.

Perhaps the prime candidate would be the company’s flagship Madden series, for which sales have slowed. Traditional versions of Madden are extremely complicated, but a simplified downloadable version would be expected to appeal to millions of more casual players.

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