Murdoch passes Wall Street’s test: The fallout from News Corp.’s phone hacking scandal continued to spread this week, with the reported arrest of another former News of the World editor and a report that the ostensibly fired News Corp. British chief, Rebekah Brooks, is still on the company payroll.

Three weeks after testifying before Parliament, Rupert Murdoch faced Wall Street analysts this week in a conference call, telling them that he’s not going anywhere and that the scandal hasn’t done any material damage to the company outside of News of the World. All Things Digital’s Peter Kafka said Wall Street really doesn’t care about the hacking, and Murdoch didn’t say much about the few questions he did get on it.

Murdoch also had to meet with News Corp.’s board, but as The New York Times’ Jeremy Peters reported, the board’s officially independent members include numerous people who have deep personal ties to Murdoch. Perhaps more troubling was a different connection among one of the board members: According to Time’s Massimo Calabresi, one of them is “best friends” with the district attorney leading the U.S. investigation into the company.

The Times’ David Carr uncovered more hints at News Corp.’s enormous political influence here in the States, detailing cases of swift approval of a merger by a Justice Department unit led by a future News Corp. executive, as well as a suspiciously dropped federal criminal case. “The company’s size and might give it a soft, less obvious power that it has been able to project to remarkable effect,” Carr concluded.

At Adweek, Murdoch biographer Michael Wolff went further, reporting that the Justice Department is considering investigating News Corp. on racketeering charges, though Forbes’ Jeff Bercovici doubted that would happen. For a bit more info on the situation, here’s a good Q&A with Nick Davies, the Guardian reporter who’s been all over the story.

AOL’s slap from investors: This week hasn’t been a good one for AOL: After it reported a quarterly loss on Tuesday, its stock dropped by about a quarter by the end of the day. All Things Digital’s Peter Kafka gave a quick explainer of why investors are so down on AOL: What little money they’re making isn’t coming from the all-important display advertising business. Mathew Ingram of GigaOM added more depth to that analysis, arguing that investors are doubting AOL’s assurances that its two big gambles — Patch and the acquisition of the Huffington Post — will pay off.

According to AOL CEO Tim Armstrong (paraphrased by Business Insider), the reason for those problems is that AOL’s advertising side hasn’t scaled well enough. Peter Kafka explained that AOL’s advertising (especially display) is indeed up, though much of that can be attributed to the HuffPo and TechCrunch acquisitions. Forbes’ Jeff Bercovici said AOL’s public image problem has even damaged the previously successful HuffPo, quoting an analyst who called AOL a “dead brand.” Wired’s Tim Carmody decided to unite our two big stories this week and suggested that AOL would be a perfect fit for a purchase by News Corp.

Meanwhile’s AOL’s local-news initiative, Patch, launched a Groupon-esque daily deal service, and Iowa grad student Robert Gutsche Jr. questioned Patch’s standards for separating journalism and advertising — and got the runaround from Patch when he asked them about it. AOL’s new daily tablet magazine, Editions, also drew some criticism, with Fast Company’s Austin Carr perturbed that it’s not AOL-y enough.

A news org gets into tablets: We’ve already seen numerous challengers to the iPad’s early stranglehold on the tablet marketplace, but the Tribune Co. might be the first news company to try one out. CNN’s Mark Milian reported that the newspaper chain is working on an Android-based tablet, which it’s planning on offering it for free or very cheap to people who sign up for extended newspaper subscriptions. It’s already missed a mid-August deadline for testing the tablet out.

Media pundits didn’t think much of Tribune’s reported idea. Wired’s Tim Carmody urged Tribune (and media companies in general) to quit developing tablets, arguing that it’s way too hard to do if you’re a major development company, let alone a news organization. “If major publishers are seriously prepared to blow up their primary revenue stream — print advertising — and slap together a giveaway tablet in order to save money on ink, God help them,” he wrote.

Others echoed Carmody’s arguments: PaidContent’s Tom Crazit called the project “a colossal waste of money for a company trying to emerge from bankruptcy.” Chris Velazco of TechCrunch said the cheap-tablet model (also being talked about by Philadelphia Newspapers) isn’t viable. Gizmodo’s Brent Rose was less restrained: “WHY??” Morris Communications’ Steve Yelvington was a little kinder to Tribune, saying the numbers might add up, but the devil’s in the details.

The Times gets experimental: The New York Times has made strong pushes into news innovation over the past several years, and this week it started another one, launching a new public test kitchen for projects in development. The Lab’s Megan Garber explained what the site, beta620, is all about, but GigaOM’s Mathew Ingram, while applauding the effort, expressed some doubt about whether the Times is really capable of developing a startup’s mindset.

Tim Carmody of Wired, on the other hand, said the startup analogy isn’t the right one for the Times. With these projects, he said, “The New York Times has become an openly experimental public institution. It’s less a cathedral consecrated to its own past than a free museum where patrons are invited to touch and transform everything they see.” Poynter’s Jeff Sonderman had some suggestions for next steps for the Times to take with beta620: experimenting with design, getting away from the long narrative article, and rethinking comments.

The real-name debate: One long-simmering debate I want to briefly catch you up on: Google+ has decided to take the Facebook route of disallowing pseudonyms, adjusting but reaffirming its policy in the face of online criticism late last month and again on Thursday. The outcry continued, voiced most prominently late last week by social media researcher danah boyd, who asserted that “‘real names’ policies aren’t empowering; they’re an authoritarian assertion of power over vulnerable people.”

Liz Gannes of All Things Digital said she understands Google’s motivations for enforcing real names and unifying everything under its umbrella within the same identity, but the idea of doing the latter is awkward at best and frightening at worst. The Atlantic’s Alexis Madrigal, meanwhile, announced he’s changed his mind against real-name policies, arguing that requiring real names online is a radical departure from the relationship between speech and identity in the offline world.

Reading roundup: A few other things to keep an eye on this week:

— Amazon released a version of its Kindle app for browsers, called the Kindle Cloud Reader. GigaOM’s Mathew Ingram said the browser-based e-book app (which bypasses Apple’s restrictions) could be a roadmap for the future, but Wired’s Tim Carmody said it still doesn’t get the web.

— Google announced it’s making its hand-chosen Editors’ Picks a standing feature on Google News. The Lab’s Megan Garber explained what Google’s doing with it. Meanwhile, James Gleick at The New York Review of Books offered a thoughtful piece on Google’s domination of our online lives.

— Adweek explained an underrated obstacle to innovation and progress in news organizations’ online efforts: the intractable CMS.

— Steve Buttry, now with the Journal Register Co., gave his lessons from TBD’s demise on the Washington local news site’s first birthday. It’s short and solid. Enjoy.