I don’t believe that there is anything Yahoo could do at this point to further destroy their business that would surprise me.
At 1:35 pm EST yesterday we posted that we believed Yahoo would announce a search marketing deal with Google, essentially ending their negotiations with Microsoft and, pending government approval, sealing Google’s monopoly position in search marketing. Twenty-five minutes later a massive sell off of Yahoo stock began - the company lost billions in market valuation over the course of the next hour as the market made it’s bets on the news.
At 3 pm EST Yahoo announced that all talks with Microsoft were formally off, and the stock fell further. It eventually climbed back a little, but by the end of the trading day, $3.6 billion had been removed from the pockets of Yahoo stockholders. Well after trading ended, Yahoo confirmed our original report that they’d signed a deal with Google to hand over much of their search marketing business.
The deal terms announced with Google appear to be fairly innocent - a non-exclusive arrangement that let’s Yahoo take Google’s ads if and when they choose to, and put them alongside their own ads, and/or other third party ads. But the truth is that this will cause even more advertisers to flee Yahoo’s platform. Which will drive auction-determined ad rates down. Which will drive Yahoo to take more Google ads. Which will…
It’s a vicious cycle and they will have no choice, as a public company, but to rely more and more on Google as time goes on.
Our sources inside Yahoo had interesting things to say about the general state of things at the office today as Yahoo’s stock price fall apart. “Unclear what’s happening” said one vice president. “Fucking train wreck, total chaos” was the less eloquent observation of a more junior employee.
When I accused Yahoo of playing the crazy card in their negotiations with Microsoft, I never thought these people were actually insane. Handing Google a monopoly in search marketing was just a ploy, I thought. A way to get Microsoft to bid a little higher than $31 per share.
But it turns out I was wrong. Yahoo’s hatred of Microsoft runs so deep that they were actually, in the end, willing to destroy the future of their company just to keep it independent for a short while longer. They’ve ignored the wishes of their shareholders, employees and many now former key employees in killing that deal. And apart from Google, CEO Jerry Yang, President Sue Decker and possibly Tim O’Reilly, I don’t believe there is anyone in the world that is happy with what has happened.
As much as everyone still has lingering doubts about Microsoft after their hardball monopolistic practices of the nineties, it’s clear that they, along with Yahoo, were the only force counterbalancing the massive presence of Google in search marketing.
Without them, Google would continue to keep the lion’s share of search marketing dollars to themselves, and distribute next to nothing to third party publishers. But Microsoft and Yahoo were both willing to fight for some of those deals, at least pushing Google’s profits down a little. Now, with Yahoo taken out of the game, it’s unclear that Microsoft can fight Google on its own. How long will they pour profits from Windows and Office into trying to compete in search?
The delicate power balance among the big players was disrupted today in a big way, and the consequences will be felt over the coming months and years. We needed a competitive market in search to ensure the health of the Internet. Now, it’s nearly impossible to see how that can happen.
It took me about five minutes of watching Yahoo’s top two executives talk last month to realize that they had no fight left in them. The fact that they simply gave up wouldn’t matter so much if the only people hurt by their actions were their employees and stockholders. But that just isn’t the case, and now we all have to deal with the fallout.
So is this another Black Friday for Yahoo? Hope they will get over this bad situations with Google help!
I believe Jerry Yang gets 1$ a year in salary, I also believe he is demanding far too much as his skills as a CEO of Yahoo have been anything but bringing value to it’s investors and shareholders. The board should be asking for a refund of 1$ and get rid of him ASAP before there is NOTHING left to salvage.
Jon
http://woodmarvels.com - Create Unique Memories
Yahoo.Fucked
the beginning of the end for Yahoo - too bad!
Where does Microsoft now find the new new new thing?
@Yahoo, if you read this:Fund me, help me and you will get out of trouble!
Y! will sync up to $33, or $43, before long.. just give it a little time, no surprise needed.
Didn’t we see that before? Yes we did!
On my visit to this page, the top banner shows an ad for jobs at yahoo. ironic indeed.
I suppose the only thing remaining now is to hope that another underdog (as Google once was) rises from the remains of this débacle and provides some kind of competition, though what precisely could stand against a new Yahoo!/Google monolith escapes me.
I am glad I left a month ago…what a mess.
Whats next on Google’s plate… Microsoft/Live? Its about time we rename the “Internet” and call it “The GoogleNet”.
THANK YOU FOR NOT WRITING ABOUT FACEBOOK. It’s a miracle!
Michael,
With due respect, I think that your position is reflecting conventional wisdom in Silicon Valley more than the real impact of the Google/Yahoo deal. A Microsoft acquisition would have been disastrous for Yahoo, with little left afterwards to show for it but temporary benefits from the acquisition of Yahoo’s ad network. The Google/Microsoft deal is not exclusive, it does not represent a monopoly, and offers the most hope for the future of the Web by ensuring a greater number of independent players. More on ContentBlogger.com.
As a shareholder, up until yesterday, I was less than thrilled with Yang’s early negotiations and poison pill tactics. But I am patient and understand the value in negotiations. Now I am downright pissed.
What the hell! Strip the value from the company, saddle it with huge commitments to employees and competitors, all in the effort to remain an independent company and screw the shareholders?
Hey Yang, you may have billions to waste on your ego trip. I don’t! Quit fuckin’ with my portfolio!
I believe in Yahoo and in their strategy. They can secure some cashflow while working on R&D to develop their tools for better search and search monetizing.
“To Know your Enemy, you have to become your enemy.” — Sun Tzu
John, when you say “A Microsoft acquisition would have been disastrous for Yahoo” are you talking about the soon-to-be laid off Yahoo employees, or the bankrupt stockholders? Because the employees would have kept their jobs and the stockholders would have been very happy had a deal gone through.
I think it just reveals that, at heart, YHOO is just another publisher - they started as web editors as opposed to GOOGs efforts to be web organizers. If GM is just a vehicle finance company it makes sense for them to outsource key R&D and if YHOO is merely a source for content it might make sense to just take the higher CPMs. That being said, the long tail challenges that limit their ability to deliver better CPMs through Panama are only exacerbated by allowing GOOGs advertisers access to YHOO inventory.
Auditing And Accounting Unit
Foreign Operations remmitance Department
International Commericial Bank ICB
Accra-Ghana West Africa.
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We keep on talking about it as if it would have been a good thing for Microsoft to own Yahoo. I think either way this was going to end badly for the consumer.
Google may have the monopoly, but i’ll take a Google monopoly over a stronger Microsoft anyday. That might be a personal vendetta against microsoft….but hey.
it’s as though yhoo, sitting on the arabian peninsula, chose to abandon oil drilling and get into the sand trade. jerry, sue, terry and jeff weiner (with the help of many others) ran yhoo into the ground. it is over.
There are a lot of alternative search engines, all covered by http://www.altsearchengines.com that can add value to Yahoo. Why not to check top of those search engines, first?
Oouch.. censored!
“And apart from Google, CEO Jerry Yang, President Sue Decker and possibly Tim O’Reilly, I don’t believe there is anyone in the world that is happy with what has happened.”
Well, you bet that there are many people around the world who are rejoicing that MS couldn’t get their hands on Yahoo and I’m one of them : I would have felt dirty if I had to pay money to MS for using Flickr…
When Microsoft steps in there is one thing for sure: the technology is about to get completely commoditized. And you need to be the gorilla - or Microsoft - to make any money on it in any more.
Yahoo has had it’s chance to be a gorilla, now it’s an old chimp loosing teeth.
Next please.
This will be interesting to see how this turns out. Unfortunately, the chances of a change of board are close to zero, as yahoo explicitely stated in their “Change in Control Employee Severance Plans” that the poison pill will be introduced as soon as a different board is elected or they are bought. (change of control).
http://www.sec.gov/Archives/ed.....efa14a.htm
Yahoo should close US operations and outsource all jobs to India.
Seriously, “Massive Destruction of Shareholder Value?” Talk about hyperbole; the shares dropped $3 or about 10% in a day. But they’re up from before the speculation about the bid from Microsoft. Meanwhile the entire stock market has tanked about 10% in the last year and about 6% in the last month! In fact, those who owned Yahoo before the bid have seen shareprice rise by 40% even with the recent drop. Think what you want of Microsoft’s bid and Yahoo’s rejection, but don’t go all crazy yourself throwing around financial terms that make no sense.
(Holding my hand to my forehead):
I see Arrington sitting in a comfy leatherette chair in a posh, art deco building, holding forth with opinion like…..an industry expert……There are old gray men at another table facing him, their faces frozen in grim masks of concentration.
Ah…..it’s a senate hearing……Arrington is poised to be the controlling opinion on forthcoming regulation.
That will be $50, please, for this day’s reading.
I agree with Arrington about Google dominance here. This will kill publishers’ ability to earn money from google ads, and Google drives at least 50% of most sites’ traffic, so they really will own most of the Web. This would clearly be a monopoly, and the government should not allow it. All of those Google lobbyists in Washington will work hard to get this deal approved. Mike, is there anything we can do to make sure the government hears our concerns?
Even after the MS deal has died, YHOO is trading at $23.52 - which is still much higher than the $18 figure they started the year with. So I guess something good did come out of all this action.
HELP WANTED. Google is looking for a Butler/Manservant for a temp role (to be phased out over time) providing menial services to its expanding online operations. Best and brightest need not apply.
weatherman - michael is a jack of all trades, and a master of only one - arrogant jackassery. You will frequently see his ridiculous “insight” on financial matters as well as deep technology (hell, I doubt he’s even functionally familiar with most web tech).
this series of posts on yahoo/google has one running theme “I MICHAEL ARRINGTON POSTED THIS STORY AND HAVE THE INFLUENCE TO BRING DOWN YAHOO’S STOCK.”
I’ve resigned myself to the fact that I come to techcrunch in spite of the content of the articles, not because of them. I’m only here to learn about new sites.
Yahoo without their search business is like a chicken that cant lay eggs. Microsoft has never been very good at web business (Live/Hotmail still puts legit mail in spam and spam in my mail box). IMHO MS would probably chase even more users away from Yahoo. After all MS hasn’t managed to create a half decent and usable search service of its own and thus has tried to aquire yahoo and its user base. The Goohoo alliance may be just as dark but at least it will improve the Yahoo user experience and will help retain users. The majority of whom probably don’t even realise that all this kerfuffle is going on.
If I was an avid Yahoo user and suddenly found Microsoft branding on all my favourite services I would probably take my online life elsewhere. Thats not because Im anti MS but rather because I use Yahoo because I like the way Yahoos services work and look and I probably don’t like the way MS services work or look. What happens? I take my business to google or a fledgling outfit because at least the spam filter on their free email service works.
Microhoo would chase away the end user and Yang and Co probably know this. Goohoo will actually improve the users experience.
Another thing: MS became a monopoly in the OS world by playing hard ball, dirty filthy hardball. Google got to the top by actually being really good at what they do. So if its between a giant douche and a turd sandwich go for the sandwich at least it has some nutritional value.
Mike, how neatly have you imputed this as a cause for the recent public departures?
Completely agree. If I was a shareholder I’d be mighty pissed off.
Great headline, but a little melodramatic… just because the Yahoo/MS deal didn’t go through doesn’t mean that Yahoo is dead… and even if a deal was done, there is no guarantee that they would have been any better at being able to compete with Google.
As I understand it, search continues to be growing and evolving market, just because you currently have the biggest share, it doesn’t mean you are able to sit back and relax; and just because you don’t yet have a big share, it doesn’t mean you are dead in the water.
As a consumer, it is effortless for me to switch from Google to Yahoo, or use both as I sometimes do if one’s results don’t seem to be relevant enough.
Ultimately, you can compete if you can innovate and deliver a good product. It’s not just about numbers or how much money you got for R&D - though money is important, creativity and innovation is also about your company culture and the quality of your employees - who knows what the next big thing in search is? And does anyone know who is going to deliver it? Personally, I think the market itself is such that it is still in constant need of improvement and creativity, and I don’t see anything stopping Yahoo (or anyone else in their garage for that matter) making something great and gaining market share.
Mike, how neatly have you imputed this as a cause for the recent public departures?
It’s really amazing how people keep stupid itnernet meles such as “Microsoft is bad”, and “verything but Microsoft”.
One of the most stupid examples : “I would have felt dirty if I had to pay money to MS for using Flickr…”
Well, many of the top Y execs have left. Isn’t this a good thing?? Who got them to $19/share?? Y has perhaps some of the most compelling opportunities for social graphs based on consumer interaction with content. Maybe with new mgmt they can capitalize on this.
Afraid of death, they committed suicide.
i’m delighted that Yahoo remains an independent company, and out of Microsoft’s clutches.
Wow Arrington, you sho’ nuff unleashed on Yahoo.
I have full sympathy with the shareholders and employees. In the short term, the shareholders have had to suffer a huge loss. But, look at the bright side. Now, these same shareholders are the part-owners of the biggest internet advertising network in the globe.
With the kind of penetration that internet has in Canada and US (where this deal seems to be valid), on the one hand, this will lead to the obvious consolidation of the internet ad space, while on the other hand, it will increase the trust that advertisers have had on internet advertising. With this, the advertisers will look at internet advertising more favourably than ever before. In short, this may be bad news for yahoo in the short term, but they can stick along then in the long run, they have only helped to strengthen the future internet advertising. My only hope is that google does not turn in a greedy giant like microsoft.
whores, simply whores. yahoo becomes a tramp. shame. yahoo surrenders to there new daddy.
Yahoo! They’re dead!
First, learn how & when to use a friggin’ apostrophe!
“it’s unclear that Microsoft can fight Google on it’s own” (1st instance is correct, second is wrong)
“a non-exclusive arrangement that let’s Yahoo take Google’s ads” (”let’s” means “let us”, and please don’t confuse that with “lettuce”)
It’s a great post & I agree with all of it, but take 1 minute to proofread your stuff for grammar!
Remember - Yahoo and Google built up their premise on the M’Soft inability to deal with dotcome business and I am not surprised - they want to carry on their legacy!
@#31 Spanglewad:
>> Yahoo without their search business is like a chicken that cant lay eggs.
Most of them are called roosters*. They still have a purpose. Chicken is a multi-gender term. You may have meant “hen that can’t lay eggs”.
* Maybe you are saying that Yahoo is a bunch of cocks….
That sound is my ad revenue going down the drain…..swirl, swirl, plop!
This drop in stock price is just knee jerk reaction. Long term, this is good for share holders.
It is better to partner with winner and be part of growing business rather than partnering with looser and both sinking.
There is no question Google is winner and best in search technologies compared to Microsoft. Being part of Microsoft would make it only “look good” but they wouldn’t increase their combined market share after they join anyway.
I just read this on Wikipedia:
“About 88% of total revenues for the fiscal year 2006 came from marketing services. The largest segment of it comes from search advertising…”
So where is the lurking value that justified a holdout for a $36+/share offer?
Game theory perhaps…non exclusive leaves the door open for Microsoft to still bid. The search market will be about the phone in the Asian and Middle East markets and that is where the value lies in Microsoft buying into Yahoo!
Although a risky ploy by Yang (sitting on his big yacht, house, ski chalet whatever), I believe Microsoft will eventually buy into their superior Asian presence.