What a day. I can’t say neither side is throwing punches any longer in the epic fight over what’s left of Yahoo. Microsoft and Yahoo are done, for the most part, with sternly worded letters.
Yesterday Yahoo made two announcements/leaks. First, that they were very close to agreeing to terms that would combine Yahoo and AOL as an alternative to the Microsoft deal. And second, that they will run, ahem, a two week test of Google Adsense on 3% of their Yahoo search results page, instead of their own ads.
Microsoft responded that the Google deal is a precursor to handing over de facto monopoly power of the search advertising space. And they threw their own curve ball as well: News Corp. has switched teams and is now in Microsoft’s camp.
The formal entry of AOL into the discussions suggests Time Warner wants to offload the asset soon. If a Microsoft/Yahoo deal goes through, the only realistic suitor for AOL is Google, and that gives them little negotiating leverage.
The News Corp news is more interesting. In a move reminiscent of the Italians switching sides in World War II, they’ve abandoned their Yahoo soul mate for a more compliant Microsoft. They put in a bid for Yahoo in February (more), which was reportedly countered just a couple of weeks ago. My guess is the counter offer wasn’t very interesting, so they switched sides. You gotta love News Corp., they’re always there for you when they need you.
But by far the most interesting news is the Yahoo/Google alliance. Industry insiders still question whether regulators would allow the deal, but Yahoo’s been whispering around Silicon Valley that a business partnership with Google, as opposed to a merger, would stand a much higher likelihood of getting approved.
What Is Yahoo’s Strategy - Scorched Earth, Or Knife To The Nose?
Yahoo has put costly severance plans in place to both retain employees and make themselves a less attractive acquisition candidate. But top talent has left anyway, and just about everyone at Yahoo seems to be looking for a job (even execs I’ve spoken with). Meanwhile, the Google deal shows they would rather give up the search marketing game, their biggest asset, than become part of Microsoft.
Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.
I can’t decide if nose knifing or scorched earth is the best way of describing what they’re doing, but I have to ask: If Yahoo “wins” this epic battle with Microsoft, will there be anything left at the end to celebrate over?
It’s time to end this thing before Yahoo ends itself. I don’t care if they throw AOL, MySpace, and half the rest of the Internet into the deal along with Yahoo. But the health of the Internet demands a counter balance to Google. Yahoo-Microsoft, given the current state of things, is the only reasonable outcome.
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Yan Can Cook. But Yang Can’t Manage! I love it.
ah,Yahoo bit Misoft
Who still uses AOL?
I don’t know if it has been mentioned yet, but it seems like we’re forgetting something pretty vital here.
http://www.google.com/press/pr.....anded.html
Which makes your poll in your previous write-up a bit unbalanced.
It should have read:
Which Would Be A Stronger Yahoo Entity?
Microsoft-MySpace-Yahoo
or
Google-AOL-Yahoo
(I’m betting the results would have been much different, eh?)
This YHOO/MSFT drama is going to turn out to be a fascinating case study of what it means to “maximize shareholder value” in corporate America. Clearly, Yahoo’s behavior is sacrificing shareholder *economic* value. It’s hard to argue anything positive economically to (1) poison pill severance packages, (2) buying internet roadkill AOL, and (3) ceding search marketing to Google. Will their shareholders let them get away with it? Perhaps, like Yang, enough shareholders accord enormous *sentimental* value in avoiding a Microsoft hostile takeover. In other words, it could be that sentimental attachment is more valuable to Yahoo shareholders than their stock holdings. Economically irrational? Absolutely. Welcome to Human Nature.
Why should Yahoo so adamantly and irrationally destroy itself by selling its soul to Google in order to oppose the Microsoft deal. By becoming part of Microsoft, it can at least create a meaninfull alternative to Google heavy weight. It is more an emotional response, not a logical one. It is only posponing its demise by surrendering to another rival.
Interesting article. But why do the shareholders let this happen?
I would much rather have AOL and Yahoo come together and take on the Yahoo brand. In my ideal world, they’d lose Messenger and keep AIM (which I feel is superior). However, they’d keep the vibrant Yahoo community (chat rooms, games, etc.) They’d definitely be a force.
Yahoo is done for. I think Microsoft has it in for them badly. And I agree, we need a counterbalance to Google, which is becoming a bit of a bully lately.
I understand everyone’s worries of Google becoming too dominating… but when I weigh that against Microsoft’s history (which is what we have to look at), I’ll take the Goog domination any day over yet another MS fail.
Which of these looks more appropriate:
1) google search - gmail - flickr - del.icio.us
or
2) live search - hotmail - flickr - del.icio.us
I mean, srsly.
when the game will be over.
Good show. Don’t let it stop.
trench - agree. but we have to take into consideration the massive market share of internet advertising dollars that flows through google. and the only way to ensure that they pay an appropriate share to partners is through real competition.
Sing along with Jerry:
They tried to make me go to Redmond
I said no, no, no.
Yes it’s been bad, the stock’ll come back
We’ll grow, grow, grow
We ain’t got a clue
But Mr Ballmer thinks we do
He’s tried to make me go to Redmond
I won’t go, go, go.
I’d rather be at home by the Bay
But can’t just sit here an’ pray
Cos there’s nothing, nothing they can teach me
That I can’t learn from Dr Eric Schmidt
41 B’s not enough
But we’re worth more than that small stuff
They’re tryin to make me go to Redmond
I said no, no, no
Yes it’s been bad, the stock’ll come back
We’ll grow, grow, grow
We ain’t got a clue
But Mr Ballmer thinks we do
He’s tried to make me go to Redmond
I won’t go, go, go.
Its pity that you are thinking only of advertising market and not the open standards movement of internet.
Any deal that can keep Muckro$oft at bay is a good deal. I wish Yahoo will prevail at the end of day.
It’s obvious that Yahoo! needs a technology breakthrough before any site will start dropping them. What don’t they look around and check who out of theior partners can bring in that breakthrough instead making those value-destroying moves described in TC article. Take Quintura as an example, from early implementation of our search cloud on partner sites we already know that we bring 70% more user engagement with search than a search box. and when we turn on graphics in the search cloud…
That can look possible if both google & yahoo join into a strategic alliance.
@18 = spam
Perhaps the only real solution is to split Yahoo down the middle and share it out.
The trouble is, the only part of Y! that anyone *really* wants is Flickr.
Let’s just make a 5 season serie of that stuff, called Microhoo.
This whole Yahoo/Microsoft story is just annoying everybody. Too much noise for nothing, at the end nothing’s gonna happen.
People–one is posturing and another is about option value.
Y!’s testing of G’s monetization abilities is purely to tell M$FT that, yeah, we’re worth more just by outsourcing search advertising to Google. Net effect is to get M$FT to up the bid. Is it a credible move for Y! to solely focus on just display ads? Yes…in a shortsighted way
Y! is speaking with AOL b/c IF they were to merge, then I don’t think M$FT can reasonably justify acquiring the combined beast–from a price (add a premium) or timing or regulatory perspective. So, the intent again is for M$FT to up the bid for Y!
AOL is speaking with Y! b/c if M$FT acquires Y!, then AOL is a bit SOL…maybe News bait at best? So, AOL is incented to join the fray–at least they can force News’ hand and get a better price. No way G ever acquires AOL.
G is there twofold: hey, maybe Y! does outsource to G…or if M$FT is successful in acquiring Y!, then the pain inflicted upon M$FT is worse (higher price paid and there’s still regulatory review and then integration pain)
Separately, a M$FT-News joint bid for Y!AOL (”Yea-OL”) would be incredibly interesting!
DING! DING! DING! We have a winner. Thanks for playing, Agent Mulder.
I can’t believe I haven’t read any analysis yet that points out that Yahoo can take the data from their Google search results test and ‘project’ how it would potentially change their numbers — i.e. make their assets look valuable, even if they have no intention of outsourcing all of their search advertising to Google.
This is clearly a play to try and get more money from a suitor.
I can’t help but feel that the events of the last month could be early warning signs that Microsoft-Yahoo are going to be the next textbook example of a poison pill strategy after the Oracle-PeopleSoft acquisition.
This kind of scenario only really fits with one type of acquisition strategy (buying a company purely for capital assets and a share of existing customer base)
A time Microsoft + Yahoo will more big Google
?
Wait palpitation is looked up
Yahoo will be part of MSFT sooner or later !
This has been, and continues to be, a huge effing mess. I understand that there needs to be a foil to Google to keep them honest, but as pathetic as Y! looks right now can they even be considered a formidable (search) competitor?
Otherwise, I just keep hoping that they don’t screw up my del.icio.us.
Would be a very nice one: finally MSFT gets Yahoo, but Y! already signed a ten years contract with Google for Search Result Ads… so who would be benefitting most ? G! … whatever MSFT invests into Y! would drive traffic and maybe quality into a channel G! already is exploiting very well.
My Take is that Yahoo/AOL remain independent and rely on what they are most into: putting media and services nicely together and do some cross selling between their properties. If they outsourece some of their services to a provider like Google doesn’t really matter to their users. Nobody outside this media scene thinks: “Uhhh… this video stream comes from a Linux/Microsoft/Google Server I don’t like it..”
My first comment ever!!
First, I personally believe that MS-Yahoo would never get by the regulators due to one thing - email. What is it, 75% combined - the EU won’t let it happen.
Second, you must remember ‘content is king’. Which is why newspapers are collectively down 5-10% across the board but USA Today and the Wall Street Journal are level or growing. They have what people read. Yahoo + AOL would be a brand king. Think about it, Flickr, Del.ic.ous (or delicious.com as their now called), Mapquest, Moviefone, Truveo, AOL Travel+Yahoo Travel (probably huge), AOL Personals (love.com) + Yahoo Personals, AOL Sports + Yahoo sports, and of course TMZ. Also don’t forget Bebo.com. Few realize that Yahoo has the #1 sports site, bigger than ESPN most months. Plus finance, the list goes on and on.
That said, go back to my original “content is king” comment. Although I really like Google, if tomorrow the TechCrunch search engine is introduced and Mike makes it good AND pays better, Google has problems. The sites which get the traffic (eyes) would flock to it.
Google has very few people that go to its site for anything other than search. Hence their apps push. MS on the other hand has it’s own issues (See Gardner reports) and MUST find another revenue (or better profit) stream soon or they’re toast.
Just my 3 cents worth.
Why won’t Yahoo respect my authoritaaahh?!
– ma
Why won’t Yahoo respect _my_ authoritaaahh?!
– hb
I’m not so sure that it is a wise move to trust the ‘health of the internet’ to a company that…hates the internet.
– everybody else
http://www.tech-exposed.com
Yahoo running Google adsense. Wow, now thats a sign of true desparation.
Is there no one who will stand against the giant Google??
Don’t always agree with you but I do agree with you on this one.
Although Microsoft is shooting themselves in the foot too. They should have just raised the bid and that was it. Remember Oracle and BeA systems.
augustus
@Howard J - Nice insight, I read somewhere (was it here?) a few months back that this also heavily hurts the startup community since the number of suitors decreases. Prime exit strategies for many startups are gone.
Why would News Corp entering the Microsoft bid make it any different?
Money’s money.
By the looks of it, Yahoo will end up going solo and go with the AOL/Yahoo route.
And abandoning their own ad platform may be, at the end, a smarter move than going with their own platform, given that Myspace was guaranteed $900 million for that platform alone and Yahoo/AOL properties would fetch a multiple of that, which could end up, on a P/E basis, increasing the combined Yahoo/AOL stock price by a huge margin.
The AOL/Yahoo merger, by no means, is a scorched earth tactic.
It’s smart counter hostile attack defense move, the smartest so far.
Jerry Yang won’t sell Yahoo! to Microsoft. Deal with it, people. It’s not a question of economics, but pride. Jerry Yang won’t sell Yahoo! to Microsoft. He’ll commit corporate haraquiri than sell his company to Microsoft.
The only way Microsoft will buy Yahoo! is via a proxy war. The problems with proxy war is that they’ll take long enough to get a Pyrrhic victory.
On using Google ad serving technology, from Bloomberg:
“Last year, Yahoo introduced an ad platform, called Panama, designed to make search ads more relevant and more likely to be clicked. In a presentation to investors last month, Yahoo said it had reduced the gap in revenue per search between its own engine and Google’s in the U.S. by 30 percent in the first nine months of 2007. At the end of last year, a difference of 60 percent to 70 percent still existed, the company said.”
60 to 70 percent!!!!
Yahoo/AOL can increase revenues overnight by potentially that amount by adopting Google ad serving technology.
And giving Google a share of those revenues will still be a net positive for Yahoo, possible by a huge margin.
Yahoo! is playing the game.
In my opinion, it has no intention of joining forces with google in the search field. The comment was made to scare Microsoft away.
Abviously, Yahoo! will not be able to reject MSFT’s offer, especially if it is a higher bid given by News Corp. and MSFT together. Yahoo’s only chance of staying out of MSFT’s hands is if MSFT itself takes back its offer.
The cooperation with google will never happen. But MSFT doesn’t have to know that, for the time being!
AOL have certainly changed their tune from the Yahoo search I did the other day:
http://www.johnjamescarson.com/yahoo.jpg
@17
“Muckro$oft”
Now that’s a good one!
Michael is absolutely right. Then again, it’s why startups continue to flourish in silicon valley- most valley management is consistently incompetent and smart people want to get away from the circus. Yahoo needs to keep in mind that despite all the talk about Microsoft’s monopoly and cultural issues, Microsoft did nothing to unfairly undermine Yahoo. Yahoo’s failures are entirely unrelated to Microsoft’s ‘monopoly’ power. So it’s surprising to see Yahoo take such a hostile position toward Redmond while preparing to embrace the one competitor that buried them alive, Google.
Yang’s behavior reminds me of McNealy during the dot com boom- focused on pointless diatribes about Microsoft but failing to deliver results or establish a path for the company’s future growth. It’s more about egos than business or maximizing shareholder return. It’s a joke. Unlike this kind of incompetence is cleaned up, silicon valley will continue to lose to Microsoft and talk about how Remond unfairly beat them in the marketplace.
every time you make political or historical comments, you prove once more your obtuseness and lack of any understanding of history.
Listen to “The Voice of Reason” (#25). Yahoo’s investment bankers are leaking information left and right about potential other deals _ just enough to be credible _ in order to force MSFT to move now, raise its bid, and stop the bleeding at YHOO.
Mike is right that Microsoft’s purchase of Yahoo is the only way to keep the Internet competitive, but Yahoo’s staged mating dance with AOL gives a few shreds of credibility to its claim that it’s worth more — maybe $50 billion. The end result should be a Microsoft counter-offer 10% higher. Everybody’s happy.
Samidh at 5 is right.
Jon at 43 is right.
This is ego pure and simple put above realistic marketplace issues and shareholder value.
The Sun reference is dead on.
Ego might feel good, but helps one become irrelevant quite quickly….
Oh yeah….Cesar at 38 is right too.
Maybe the Obama campaign can buy Yahoo. That would fix everything.
it’s not not scorched earth - that you do when you’re in a position to chase your enemy into the woods and blast out everything in your pursuit of them.
Maybe it’s more like the “scorched earth defense” but that’s better described as “scuttling your ship” and I haven’t heard Yahoo tossing any of their interesting products (mobile, flickr, etc.) overboard.
The Yahoo/Google deal is interesting but weirdly non-committal. It’s like Woody Harrelson loaning out his wife to Richard Gere for a million bucks because he’s been a terrible gambler. Wait a minute, didn’t they make a movie about this?
Will we see a pyrrhic victory?
wait ’til the ad business tanks some more, lots of opportunities for startups just around the corner, just not for the big bucks