Celebrity-oriented news sites have grown substantially over the past year—comScore says the category’s traffic has grown 31 percent from May 2007 to May 2008. So while the space has been identified with TMZ, Gawker and PerezHilton, which tend to zero in on the more sordid aspects of the rich and famous, People.com editor Mark Golin and Fran Hauser, People Digital’s president, insist that their site’s softer touch not only resonates with readers more, but it keeps advertisers open to new initiatives as well.  Note: Hauser is speaking at our EconCeleb conference later this month in Hollywood, talking about, what else, celebrity content and transforming the brand into digital platforms.

-- Games People.com plays: One of the new initiatives that People.com unveiled this past week is its new Games channel. Launching with six games, such as Celebrity Trivia, Hollywood Hangman, Love Connection and other fun revolving around entertainment, the channel is part of what Golin and Hauser say is a key part of the site’s growth strategy. Hauser: “We’ve built five channels over the last two years. When I came to People.com [in January 2006 as GM] it was only news and photos. Since then, we have built out five separate channels: StyleWatch, TV Watch, Video, archives and a celebrity database. And now we have Games.” The addition of the new channels—along with greater use of search engine optimization and promotion of its RSS feeds—have given People.com 9.2 million monthly uniques (according to May comScore (NSDQ: SCOR) numbers), says Hauser. Golin adds: “Look at the whole entertainment category grew by 31 percent year-over-year. But People.com grew 60 percent.”

-- Keeping it positive: Aside from creating new channels in-house, People.com is also looking for outside sites to buy. Just over a month ago, People.com bought CelebrityBabyBlog. Before making the purchase, Golin says People.com looked at roughly 700 other sites. It was important that the tone and spirit of the site fit with People.com’s less aggressive approach to covering celebrities, he says. Golin: “Our readers like the good news about a birth and like to celebrate with the stars. Last year, there was a lot of high drama in celebrity news; people shaving their heads, showing up naked in photos, going to rehab. We did a fast look at what the top pageviews for stories were in 2007 and all the top stories were negative ones. This year, the top stories are babies and weddings – and the positive stories are doing an average of three times better than the top ones last year.”

-- Acquisition strategy: Aside from the traffic, People.com views CBB as a good lure for advertisers looking to reach young moms. Hauser: “That’s a highly attractive vertical for us. So the ultimate question we ask when we consider an acquisition like this is: can we monetize it? Is this going to break a new advertising category for us? That’s exactly what this does. CBB was a small acquisition, but it checked off a lot of boxes for us. So we are actively looking at other sites to purchase, and we’re keeping that criteria top of mind. We’re also focusing on technology. Is there a website that would add a meaningful technology application to the site, something that would make People.com more useful? Still, we’re just looking right now, nothing’s imminent.” More from Golin and Hauser after the jump.

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Microsoft-owned MSN is going to part ways with its JV partner Internet Gold in Israel, and will be running MSN Israel portal on its own from October this year, the two companies announced. IG is an Internet-related holding company in Israel, and has been MSN’s local partner since 2000...MSN Israel is 50.1 percent owned by the Internet Gold Group and 49.9 percent owned by Microsoft.

The two companies currently discussing the terms of separation/migration and possible future cooperation, and msn.co.il portal will continue to operate throughout the transition period. No clear reason was given for this separation, except to point out that in almost all of the 44 countries that MSN operates in, it is fully owned by Microsoft. In 2007, MSN Israel accounted for less than 3 percent of Internet Gold’s total revenues...IG has moved towards holding in telecom and communications, and online portal activities represent a small part of its focus now. More details here.

Meanwhile in U.S., MSN has swapped out Expedia as its travel partner, and Orbitz Worldwide’s sites Orbitz.com and Ebookers.com websites have replaced it in the U.S. and UK respectively. The change, which Orbitz said could bring about 3.5 million visitors per month to Orbitz via MSN Travel, represents a blow to Expedia, which began life in 1995 as a Microsoft company, reports Reuters.

• Internet Gold Acquires 51% of Israeli-Arab Portal Yahala

As has been rumored fro a few weeks now, Merrill Lynch is in negotiations to sell its 20 percent stake in Bloomberg, as the cash-strapped investment firm is loking for ways to raise more money, reports NYP. A blind trust run by Mayor Michael Bloomberg, the founder, is emerging as the probable buyer. Merrill owns a 20 percent stake in the financial data provider, and provided seed money in 1981 for the mayor to launch the business. Bloomberg also has the right of first refusal to buy the stake, and with limited number of buyers, that seems the most likely possibility.

Analysts have valued Merrill’s stake at about $5 billion to $6 billion, but no agreement has been reached over the valuation, reports NYTimes. In a twist, Merrill may help Bloomberg finance a buyback of the stake, the story says.

Losing its independence on Independence Day, Lexico is now part of the Ask.com family, as IAC’s (NSDQ: IACI) portal completes its purported $100 million cash acquisition of the Dictionary.com, Thesaurus.com and Reference.com operator. Announcing the completion, which had been expected in Q3, Ask.com Jim Safka: “The combination… significantly expands our audience reach, and aligns perfectly with our customers’ needs.”

The Long Beach, Calif.-based company was founded in 1995 by CEO Brian Kariger and Daniel Fierro. Both will be staying on for the integration into Ask.com. Its iconic domains come with a serious amount of traffic, increasing the Ask Network’s traffic by 11 percent to 145 million-plus uniques. Neither party disclosed the price when they announced the deal on May 15 - estimates came from a source familiar with the situation.

• Lexico, Dictionary.com Being Acquired By Ask.com; Price In $100 Million Range