by Patricia Sellers

As speculation ever swirls about Yahoo (YHOO) and Microsoft (MSFT) joining forces to give Google (GOOG) a better run for its money in search, one party in the on-and-off  negotiations has been notably evasive this week. “If we ever have a deal with Microsoft, it will be announced publicly and until we do, we have nothing to say,” declared Yahoo CEO Carol Bartz at the company’s shareholders meeting yesterday in Santa Clara, California.

A world away in France, one day before, I did an onstage interview with Steve Ballmer, Microsoft’s CEO, at the Cannes Lions International Advertising Festival, And of course I asked him about the likelihood of a deal with Yahoo. Some industry watchers have speculated that the early success of Bing, Microsoft’s new search venture that debuted June 1 (and in less than a month boosted Microsoft’s share of U.S. search results pages to 12% from 9%, according to comScore) makes a Yahoo deal less essential–for Microsoft, at least. Here, in this excerpt from our Wednesday conversation in Cannes, Ballmer suggests that’s not necessarily so…

Sellers: For every share point that you gain in search thanks to Bing, by what percent does that decrease the need to do a deal with Yahoo?

Ballmer: Have you ever heard of a more back-handed way of asking the question than that?  Oh my God… (He waits for audience laughter to die down.) OK, I’m going to try this one time. First of all, we have no interest in acquiring Yahoo.  Can I…? I’ve said that 88 times. I’ll say it the 89th just to make sure it’s clear.

I have said, and I will continue to say, we remain open to a partnership with Yahoo. I think the thing that advertisers. probably more than anything else, appreciate is: When you have two players that are fairly low-share, sitting in an advertiser’s shoes, you have to decide how many of the “search engines” do you bid on and how many key words do you bid on per platform? More people, more advertisers bid on more key words on Google than on Yahoo or Microsoft–even more dramatically outside the U.S. than in.

Forget the economic side to that story, it also affects the product.  The more relevant ads the search engine can serve up, the more relevant the whole page looks. When your average consumer looks at the search page, they don’t just say, “I’m going to look at the algorithmic results.”  They look at the whole page, including the ads.

So, I will tell you, I have a friend who rents apartments–mostly to American tourists. She rents apartments in Paris. If I wasn’t her friend, she would not submit bids. In the old days of 8% share–this goes back a year–she wouldn’t probably bid on our system. She’d only bid on the market leaders. So now somebody types “apartments in Paris for rent. And they’re going to get the relevant ad on the market leader. And they may not get the relevant ad on Yahoo or on Microsoft.

So a partnership makes sense, not because of technology just. Or business just. It makes sense because I think we can provide a better product through scale to our users based upon the kinds of interactions we have with advertisers. I want every bid on every key word that every advertiser in every part of the world would put on Google, I want on our system. As much not just for the revenue, but as much for the value in terms of the relevance of our offering as anything else.

So, am I open to a partnership with Yahoo? We remain open to a partnership with Yahoo.

Sellers: So what’s the likelihood that there will be a partnership in the next year?

Ballmer: Who knows?  Who knows?  I can…

Sellers: Carol Bartz wants “boatloads of money.” Don’t you have, like, almost $30 billion of money in cash?

Ballmer: We’ve got shareholders who want to make sure we take good care of it.

– Thanks to Joshua Glasser and Jessica Shambora for additional reporting.

“All content consumed will be digital…social…and interactive.”

- Microsoft (MSFT) CEO Steve Ballmer, predicting the death of print yesterday at the Cannes Lions International Advertising Festival. After Ballmer, in a talk to 1,000 or so ad and media folks, floated this prediction about the world within 10 years, I interviewed him on stage. Stay tuned to Postcards these next few days. I’ll share some of what the always boisterous Ballmer said, about Bing and Yahoo (YHOO) and Google (GOOG) and more.

Turns out, we had so much ground to cover yesterday that I didn’t get to ask him if he means, by his prediction, that magazines and newspapers won’t exist on paper in 2019. Does Ballmer really think that my company, Time Inc. (TWX), won’t be printing anything on paper a decade from now?

The man answers. Here I am, back in New York and sitting in my living room, taking in the news about Michael Jackson’s death. An email from Ballmer popped in moments ago: “I really really think print goes away.” Well, good for Microsoft, I guess. For us journalists, more pressure to adapt.

Greetings from France. I’m at the Cannes Lions International Advertising Festival, where the skies are sunny and the industry outlook is dark. This morning, Marcel Fenez, managing partner of PricewaterhouseCoopers’ global entertainment and media practice, laid out the dismal details. He called the current recession in ad spending “not cyclical but structural.”

Which means that the advertising business has permanently changed. And it’s going to be rough sailing for a long while. Global ad spending will decline 12.1% this year, Fenez estimated. Next year will be another bad year — down 2.7% — before an upturn begins in 2011.

That’s the worldwide view, and the U.S. picture looks even worse. Fernez forecast a 14.8% drop in spending this year and 3.3% next year.  Hardest hit: TV, newspapers and consumer magazines. (That’s us at Fortune!)  Stealing share as the total pie shrinks: Video-game companies and the Internet. (That’s us at CNNMoney.com!)

“The upturn will be all about structural change,” says Fenez. So what’s a big fat media company to do? In lieu of getting more ad revenues, media outfits will try to get consumers to pay for content, particularly digital as the world goes in that direction. PricewaterhouseCoopers’ 2009 survey of consumers across the globe indicate that they’re game to pay for quality and premium content. So, says Fenez, we’ll see lots of experimenting with micropayments, stored-value cards, and “all you can eat” subscriptions. But it won’t be easy getting people to pay for what they’ve gotten used to getting for free.

To take a deeper dive into the global outlook and the challenges, you can go to pwc.com/outlook and see the full report, executive summary and video….Now heading to the Cannes Lions Tweet-up with Twitter co-founder Biz Stone and Hill & Knowlton. More later! — Pattie Sellers

I had breakfast this morning with an old friend, Scot Safon, a fellow Wahoo from UVa Class of ‘82. He’s now chief marketing officer of CNN. We both work for Time Warner (TWX) now (and we both think we have the best jobs in the world, even as our jobs get harder everyday).

Scot, who lives in Atlanta, was here in New York this week because he’s on the board of Promax, an association for marketing and promotion execs in the entertainment industry. And Promax had its annual confab at the New York Hilton.

Scot told me this morning about a talk by Jim Margolis, whom he introduced at the powwow on Wednesday. Margolis, a senior partner at a political advocacy and advertising firm called GMMB, was a top strategist on Obama’s Presidential campaign.

“I studied 18 different Presidential marketing campaigns in 2007 and 2008, and I found every one interesting,” Scot told me over breakfast. “But the Obama campaign rewrote the rule-book in so many ways.”

Margolis laid it all out–creating a movement around the brand, grassroots organizing, social networking–in a case-study presentation called “Obama for President: The Campaign that Changed Everything.”

What really struck this crowd of marketing pros, though, was Margolis’s main message, which he illustrated by showing a video of Barack Obama speaking. If Margolis hadn’t noted that the clip was from the 2004 Democratic National Convention, most people would likely have assumed it was President Obama speaking today. The point: Brand consistency is everything.

Why did Barack Obama become President against all odds, and why are his favorability ratings still high? His message and his values have stayed consistent for five years. Great marketing starts with the product and a consistent brand.

Good to think about as I head to the Cannes Lions International  Advertising Festival in the south of France. (Goodbye, soggy Manhattan!) I’m interviewing Microsoft (MSFT) CEO Steve Ballmer — the Lions’ Media Man of the Year — on stage there next Wednesday. What should I ask him? Let me know!

by Jessica Shambora

Raises may be up in smoke, and those perks we loved too. But talk is cheap–which may be why Time Inc. (TWX), my employer, has started doing in-house training seminars, taught by its own senior execs and veteran editors.

I’ve been trying out Time Inc. University’s “Learn from a Leader” classes. People Managing Editor Larry Hackett has led “The Cover Selection.” Vivek Shah, who used to oversee Fortune and now is the digital boss for Time Inc.’s News group, taught “How to Monetize a Website.” We’ve even got Pattie Sellers — Fortune Editor at Large as well as Postcards‘ founder and boss — doing a course on, of all things, powerful women. Go figure!

Company-sponsored classes can be an awful waste of time. But actually, I learned a lot the other day when I went to “The Anatomy  of a Digital Startup,” led by Time Inc. SVP Andy Blau. He’s the GM of advertising sales and marketing and also president of Life (but today brought news that he returning to the News Business Unit as SVP and Group General Manager).

Remember Life? After briefly reincarnating as a Sunday supplement a few years ago, the once-great magazine is back again –now in digital form as Life.com. Blau and Life managing editor Bill Shapiro partnered with Google (GOOG) to scan millions of photos dating back to the 1850s — only 3% of which ever appeared in Life magazine — and struck an ad revenue-sharing deal to pay for that work, which took more than two years. Time Inc. also partnered with Getty Images to collect photos and build the site. It launched on March 31, with 7 million photos, plus 3,000 new photos from Getty added daily.

Most people would have bet against it. But Life sprung back to life. With hardly any promotion, Life.com exceeded one million page views on each of its first two days. On the third day, the anniversary of Martin Luther King Jr.’s death, the site featured never before seen photos from the day he was slain; traffic jumped to 10 million page views, from media mentions and lots of buzz. Controversy helps: The first week of June, Life.com logged 46 million page views, thanks in part to color photos of Hitler. Unearthed photos of Marilyn Monroe also drew millions of page views.

“Now the hard work begins,” Blau sighs, explaining how the team will use search engine optimization,  partnerships and viral drivers to attract eyeballs to Life.com. One lesson they learned: Keep it simple. Life  is alive again online partly because it’s user-friendly. You can easily search for photos by topic, time period, interest or photographer. You can buy framed prints. And soon you’ll be to create personal life timelines through photos of news events and pop-culture moments–and publish books and magazines.

I’ll try those features as Life.com evolves. Next week I’m heading to “How to Land the Big Interview,” taught by Entertainment Weekly managing editor Jess Cagle. Hmm, I wonder if Jess will tell me how to get Angelina to tell her real story to Fortune.

“You can’t keep any of this news down anymore…The process of getting the word out is totally democratized.”

– Christiane Amanpour, CNN’s chief international correspondent and a native of Iran, in Thursday’s New York Times. As foreign journalists in Iran are forced to leave the country — Amanpour returned to London after her Iranian visa expired Tuesday — the world is looking to citizen reporters to capture the unrest in the wake of last week’s controversial presidential election. Videos of the violent crackdowns posted on Google’s (GOOG) YouTube have been viewed by thousands, while oppostion candidate Mir Hussein Moussavi is using his Facebook page to organize protests.  As we mentioned in Wednesday’s power point, Twitter is also playing a crucial role in giving protesters a voice, despite the Iranian government’s efforts to silence them. –Jessica Shambora

Betsy Morgan is out as CEO of HuffingtonPost.com — and her firing came as a surprise to her, Morgan told me when we connected by phone late this afternoon.

“Bummer.” That was the first word she uttered in our conversation. Morgan says she’s not bitter, however. After all, what a ride Arianna’s web venture has been these past 20 months. Morgan joined in October 2007 — and I remember it well because she was at the Fortune Most Powerful Women Summit as the news of her hiring hit the papers. Just hours after Arianna Huffington, Morgan’s boss, introduced her new CEO to the 300 women leaders gathered in California, Morgan was called back east. Her mother had died suddenly.

It was a dramatic start of a dramatic 20-month ride. Back in the fall of 2007, HuffPo, as the site has come to be known, was attracting 1.2 million unique visitors a month. This past April, it drew 5.6 million uniques, according to ComScore. While traffic more than quintupled, revenues doubled. The Huffington Post morphed from a political to a mainstream site. And the company, which has raised some $35 million, is edging toward profitability.

Replacing Morgan as CEO is Softbank Capital’s Eric Hippeau, a media-industry venture capitalist who has been on the HuffPo board since 2006. Morgan could have stayed at the company in a lesser role, but she doesn’t want to do that. So, what’s next? She’s asking herself. “My biggest question is,” she told me, “Do I help fix an old media business or do I help grow a new one?”

Having joined HuffPo from CBS (CBS), where she ran CBS News’ digital arm, Morgan knows both sides of the media business. “God, I’ve seen so much of that side where you invent differently and innovate differently,” she says. “But I also know so many media companies that have gone halfway into digital. Do I go help them with that?”

As she contemplates her future, she’ll attract her own traffic — headhunters, that is. Arianna may help her decide her next act. The parting between these two powerful women is neither pleasant nor easy, but it’s amicable. “I loved working with Betsy,” Huffington told me today. “We talked every morning at 7:30. It was always a partnership. And she was always a class act.”

Before Morgan and I ended our conversation, I asked her what she learned from the reigning diva of digital. “Arianna taught me that everything you do, you should do with passion and a sense of humor,” Morgan says. Oh, and one other thing, she said: “The sky’s the limit.”

The sun’s coming out in New York City after a week of seemingly endless rain. This was also a whirlwind week of interesting encounters.

On Tuesday, I had lunch, unexpectedly, with Walt Disney (DIS) CEO Bob Iger. We were both at the New York Stock Exchange for Jeff Sonnenfeld’s Yale CEO Summit, and Iger was getting the “Legend in Leadership Award.” The Summit was off the record (as was the lunch), but I can tell you that Iger talked about the commonly held notion that the world is flattening out culturally. It’s a misconception, he contends. He noted a rise in local pride and said that Disney, in response, is turning distribution centers into creative centers and producing more local TV shows. My Fortune colleague Richard Siklos wrote about this and more in “Bob Iger Rocks Disney” earlier this year.

On Wednesday, I led a Q&A with Condoleezza Rice. This was for a small group of execs, private and pro bono. (We at Fortune can’t take money; I do these gigs occasionally for exposure and connections.) It was off-the-record, but I can tell you that Rice, now at Stanford University, is optimistic about the Middle East. She’s planning to teach in the fall. For now, she’s busy writing two books: one on foreign policy and the other about her parents. Ever a model of discipline, she gets up at 5:15 a.m. to work out — better than a 4:30 a.m., which was her wake-up time in Washington. This is her routine six days a week — after working out, she writes for three or four hours. (And yes, she’s writing the books herself.)

Yesterday, my Postcards partner Jessica Shambora and I shared and learned wisdom about careers on NBC Universal’s Mentors Walk. Check out our Thursday’s Postcard. By the way, Jess and I saw The Taking of Pelham 1 2 3 last night. If you’re up for intensity, see it. Travolta is tremendous.

P.S. David Kirkpatrick, Fortune’s star tech editor and writer who’s been on book leave since last August, just swung by and gave me a big, big hug. He’s working tirelessly on The Facebook Effect, due next spring. You can follow the book’s progress and become a fan at www.facebook.com/thefacebookeffect.

Seventy of New York’s top women in media joined 160 aspiring young women for a “Mentors Walk” in Central Park this morning. It was drizzly and great. NBC Universal (GE) and Step Up Women’s Network, a non-profit group all about advancing women and girls, hosted. The Mentor Walk’s creator, former Oxygen Media CEO Gerry Laybourne, was there along with J. Crew (JCG) President Tracy Gardner, Bank of America (BAC) Merrill Lynch media analyst Jessica Reif Cohen, Glamour Editor-in-Chief Cindi Leive, Real Housewives of New York star Bethenny Frankel….an eclectic mix!

Lauren Zalaznick, president of NBCU’s Women & Lifestyle Entertainment Networks, was mentor-in-chief. She, along with the rest of us mentors, accompanied the young women on a “walk & talk” through Central Park, followed by breakfast at Tavern on the Green. I walked with a young woman named Maria Jordan, a young finance manager who spent four years at IBM (IBM) before moving to General Electric’s (GE) NBCU. Jessica Shambora, my Postcards colleague, walked with Zalaznick, who is something of a media-industry phenom, having built Bravo into a highly profitable cable brand. Jessica and I both learned a lot and thought we’d share with you by letting you in on our post-Mentors Walk email chat:

Jessica: What did you talk about with your mentees?

Pattie: My favorite advice that I give to young people, women and men alike: Focus on the job at hand. Don’t plan your career. And think of your career as a jungle gym, not a ladder. Who can know, especially in today’s unpredictable world, what the next big thing will be? You need to have peripheral vision and swing to opportunities as they come along. Agree?

Jessica: I do. I think Lauren Z. would too. She told her mentees, “In your career, you can have high expectations for good experience, but it’s hard to have expectations for an exact path.” From her perspective, today was about helping the mentees understand the things they need to be thinking about to get to the next level in their career, as opposed to thinking your mentor or anyone else is going to just give you a job. Although we both know that can happen at these events!

Pattie: Indeed! So I gotta share our story. I did my first Mentors Walk in 2006. I was assigned to a mentee named Selena Soo, this charismatic young woman who got a velvet grip on me and never let me go. Since then, I’ve spoken and moderated panels at events that she’s organized. One event was 15 months ago at NYU: a career panel with Citigroup (C) CMO Lisa Caputo and a few other rising-star women. Before the panel began, you walked up to me and said, “My name is Jessica Shambora. I’ve read your stuff for years and I’ve seen you on panels. I even blogged about you.” I loved your manner and your confidence.

Jessica: Yeah, I just thought it would be cool to get to know you. I felt a strong connection to the “Most Powerful Women” idea—the stuff that you talked and wrote about often. I never imagined what would happen next. I was just pursuing my passions and interests, and it led to one of those “right place, right time” situations…

Pattie: That’s a lesson. You never know what will come out of a chance encounter. As a Fortune Editor at Large who started here 25 years ago as a reporter (like you are now!), I’ve been struck so often that just getting out there brings opportunity. First, you have to be curious. Curiosity is an undervalued trait. Second, you need to think broadly. Back to that peripheral vision that I mentioned. It’s so easy to bury yourself in your work—there’s so much to do!—but if you’re young and really smart, you think broadly: How can I contribute beyond my assignment? You look for ideas outside your four walls. That is, if you have four walls!

Jessica: Yes, and these are all things you can do no matter what state the economy is in. In fact, you should do them even more during tough times. We’ve heard this from a few different business leaders that we’ve written about on Postcards: Don’t hunker and hide. Get out there, be curious, look around. Think big.

One of the last things Lauren said this morning was about strking the right balance between celebrating and questioning success. When times are tough, she said, make sure to celebrate successes. In good times, deconstruct your successes so your business will have discipline and rigor to survive tough times. It’s a bit counterintuitive. But it’s good advice so you don’t get complacent or take any success for granted.

Pattie: I would never!

New York City is second fiddle to Silicon Valley when it comes to tech start-ups. But one intriguing new Internet company is about to launch here in Manhattan in two weeks.

Have you heard about Hunch? This morning at a Women in Media breakfast, I ran into Caterina Fake, the  entrepreneur best known for co-founding Flickr and selling it to Yahoo (YHOO). Last time I saw her was at the home of Sheryl Sandberg, Facebook’s COO, in Silicon Valley. As I’ve written, Sandberg frequently hosts tech’s rising-star women for soirees with guest speakers.

Hunch was just a glimmer of an idea back then. It was going to be site for consumers to use to help them make decisions. But, Fake (left) told me today, she hadn’t a clue about what it would look like or how it would be used.

Now she knows. She describes Hunch as a mix of a “decision tree” and a “Magic 8 Ball.” (Remember the toy black ball that told you your fate and fortune when you were a kid?) On Hunch, you type in a question like…

What car should I buy?…

What’s wrong with my pet?…

Should I write a novel?

And Hunch responds by asking you questions. You click Yes or No in response to each one, and eventually you arrive at an answer. Fake says that she and her colleagues worked to make Hunch fun, like a game, so people stay on the site for a while.

What will visitors use Hunch for most often — career advice? Food tips? Shopping savvy? Fake doesn’t know. That’s part of the excitement of launching a new venture, she says.

This breakfast, part of Internet Week in New York, included lots of high achievers, who have jumped from traditional companies to the digital space. There was Betsy Morgan, who left CBS (CBS) to be CEO of the Huffington Post. And Susan Lyne, ex-Disney (DIS) and Martha Stewart Living Omnimedia (MSO), who is now CEO of Gilt Groupe. You wouldn’t think that this online fashion-brand merchant would have a Gooogle-like growth trajectory, but it does in its first two years. Watch for Lyne to broaden the platform  beyond high-end clothes and accessories.

It was a kick to see Eileen Naughton, who was, in the mid-’90s, general manager of Fortune and later president of Time magazine. She spent 16 years at Time Inc. (TWX), got squeezed out in 2005, and landed on her feet. Actually, she landed at Google (GOOG), where she’s now director of digital platforms. Her purview includes YouTube and DoubleClick.

Naughton echoed the other women at the breakfast, who said that New York City needs more engineering and tech talent to compete with Silicon Valley. “The best place to get engineering talent right now is investment banking,” Naughton said.

That’s a silver lining of the recession: tremendous talent, looking for new employment. Another silver lining is attractive real estate prices. Another tech entrepreneur, SheFinds Media CEO Michelle Madhok, told the group that she just rented 1,000 square feet for new offices and scored a deal: $22 per square foot. That’s about 40% lower than a year ago.