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Apr-14-2008Microsoft Shouldn't Swing for the Fences(topic overview)
CONTENTS:
- During a Friday meeting, Yahoo's board authorized the company's management to meet with Time Warner and Microsoft this week, according to a New York Times article, but the portal still has not made a formal decision on its future structure. (More...)
- House Judiciary Committee Chairman John Conyers, D-Mich., said Thursday that that potential underscores the need for a hearing about competition on the Internet and online advertising. (More...)
- The first big surprise was news that Yahoo is trying out search advertisements from Google, Yahoo's largest rival and, for that matter, Microsoft's, too--at least when it comes to online aspirations. (More...)
- Among other members, AOL, Facebook, Google, Monster Worldwide and Yahoo, in addition to trade groups the Network Advertising Initiative and NetChoice signed the letter. (More...)
- Yahoo, owner of the second most-used search engine, said in a presentation to investors last month that it narrowed the gap in the amount of revenue generated from each search query by 30 percent in the first nine months of last year. (More...)
- "Microsoft is not expert at doing acquisitions. (More...)
- Fact is that MSFT does not have the technology in place in time to do search, ad serving and cloud computing (largely due to using Windows servers) to compete with Google. (More...)
- Google still made as much as 70 percent more in sales from each query at the end of 2007, Sunnyvale, California-based Yahoo said. (More...)
- 'Jerry is doing the right thing for shareholders,' said Larry Haverty, an associate portfolio manager at Gamco Investors, which owned more than 1.2 millions shares of Yahoo at year-end. (More...)
- The Microsoft chief has a reputation for being one of the most aggressive operators in the business world. (More...)
- Soon, though, Yahoo will move to a variable minimum price, the company said Friday. (More...)
- Microsoft might be big evil and disliked, but AOL is just downright crap. (More...)
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During a Friday meeting, Yahoo's board authorized the company's management to meet with Time Warner and Microsoft this week, according to a New York Times article, but the portal still has not made a formal decision on its future structure. Earlier this year, Microsoft made public an acquisition bid of Yahoo, who's seen its stock price slide in recent years, worth $44.6 billion, though the value of the offer has dipped since then. Yahoo rejected this proposal, saying it undervalued the company, but last week Microsoft said it would, later this month, begin a proxy fight for control of the company if Yahoo didn't agree to terms. Yahoo has also been looking at a merger with Time Warner's AOL and it entered into a limited deal with Google, in which that company would sell some of its search ads. Yahoo will examine these options during the week, said the Times. [1] Seven years later AltaVista and Excite have gone, Ask Jeeves has become Ask. com and been taken over by IAC, the internet conglomerate, and Google has firmly pushed Yahoo into second place. "We are creatures of habit and if something enters the culture in such a deep manner as Google has, yes, the competitors are there, but you are fighting cultural forces that are difficult to change," said Ali. He was one of the first to report that Yahoo was considering a deal with AOL. Under the plan being discussed, Time Warner would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity. Yahoo would use Time Warner's cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere above Microsoft's $31-a-share offer. Last week Yahoo began a two-week trial with Google, using its rival's technology to place ads on some of its American search results. The trial should tell Yahoo whether outsourcing its ads to Google would have a significant impact on its advertising revenues.[2] The deal's valuation of AOL at $10 billion and the 20% stake that Time Warner would take in the combined entity suggests a value of approximately $50 billion on Yahoo, or more than $37 a share. Another wild card is the lurking presence of Google. At the same time Yahoo put forward its AOL proposal last Wednesday, it announced that it would conduct a two-week test of Google's AdSense search services, which will deliver Google ads alongside Yahoo's search results. AOL already outsources its search function to Google, and Wall Street analysts say Yahoo could expect a pop of $5 or more in its stock price if it were to do the same. Of course, it would also be an embarrassing admission that Yahoo's enormous investment in its Project Panama ad search platform has been a bust'something most technology experts already take for granted. 'They hyped it, they delivered it late, and it hasn't lived up to expectations,' said Ms. Gluck. Yahoo emphasized that the test was limited to no more than 3% of its search queries and that the move 'does not necessarily mean that Yahoo will join AdSense for Search program.' But it certainly puts the possibility out there. Microsoft wasted no time in pointing out that a full outsourcing agreement between Yahoo and Google would give the latter a 90% share of the U.S. search advertising market. 'This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo,' Microsoft said in a statement last Wednesday.[3] The deal would apparently see Time Warner dole out a hefty cash fee in exchange for a 20 per cent stake in a combined entity. The proposed venture would value AOL at $10 billion and would exclude its faltering ISP operations. Under this scenario, Yahoo would use the cash to buy back millions of its own shares to bolster its holdings and boost stock prices. The AOL tie would serve as one of two prongs in a defense against Microsoft - the other being a newly announced deal to outsource at least some of its Web search ad operations to Google. Yahoo hopes to determine whether allowing its erstwhile rival to manage the business will drum up more revenue.[4] The agreement, which would exclude AOL's dial-up internet access business, would reportedly value AOL at around $10 billion. According to the source, Yahoo! would use the money provided by AOL to buy back millions of its own shares to boost its holdings and raise its stock prices. Greg Sterling, an analyst at Sterling Market Intelligence, stated that, were AOL and Yahoo! to combine, they may choose to make their instant messaging programs interoperable, USA Today reports. He went on to say that both Yahoo! and AOL's strengths are in display advertising, adding: "Together, ad reps would have an easier time selling a large audience. It would give both a big boost." Reportedly, the move to avoid a Microsoft takeover is part of a two-pronged strategy which would also see Yahoo! team up with Google to outsource some of its web search ad operations.[5]
At the time, Anderson predicted that the aQuantive purchase could embolden Microsoft to pursue other deals. Another rumor last week had Yahoo angling to buy AOL in a deal that would value Time Warner's struggling online unit at $10 billion and give Time Warner a 20 percent stake in the merged company. Yahoo would also get some cash, with which it would repurchase its own shares for between $30 and $40 each. Yahoo's board of directors reportedly met Friday to mull its options. They have said consistently the company is worth more than Microsoft is offering, and Parakh was one of many analysts to speculate that the AOL and Google deals were floated to persuade Microsoft to raise its bid.[6] Microsofts cash-and-stock offer now values Yahoo at $29.33 per share, which the Web company rejects as too low. Before Wednesday, Yahoo appeared to have run out of alternatives to Microsoft, which threatened last weekend to lower its bid if it was not accepted within three weeks, or April 26. Yahoo is now nearing a deal with Time Warner to fold AOL, excluding its dial-up Internet access business, into a combined company, sources familiar with the talks said on Wednesday.[7] "Time Warner is hoping to scuttle a Microsoft bid for Yahoo, while News Corp. is hoping to get a slice of the pro forma Microhoo pie. We think both attempts make strategic sense. For both congloms, the race is on to make decisions and draft proposals for shareholder approval before Microsoft's bid is scheduled to go hostile on April 26. While News Corp. sources expressed caution about how tenuous talks are right now, those at Time Warner were more aggressive in making their case. "From the Yahoo shareholder point of view, the question is going to be whether it's better to take cash and then have Yahoo as you know it end, or whether a brighter future can be seen," said a Time Warner insider. "If you put together the Google ad trial and our content, it's an appealing alternative." AOL has been a particular albatross around the neck of Bewkes since he took over Time Warner last year. Though the CEO has made bold moves such as drastically downsizing New Line, he hasn't yet figured out a winning strategy for AOL, which has been struggling for years to reinvent itself ever since its Internet access business started fading. AOL recently has been re-thinking its approach to content with a focus on niche sites while beefing up its advertising operations under the rubric Platform A. Last month, it agreed to acquire British social-networking site Bebo for $850 million in order to better compete with MySpace and Facebook. Amid all that, AOL's advertising revenue has been growing at a healthy clip -- 18% last year -- but not nearly enough to make up for the huge losses in its subscription Internet access offering, which fell by 52% in 2007.[8] News Corp. ( NWS, Fortune 500 ) is talking to Microsoft ( MSFT, Fortune 500 ) about joining its bid for Yahoo ( YHOO, Fortune 500 ) by folding in MySpace with Yahoo and MSN, while Time Warner ( TWX, Fortune 500 ) is angling to merge its AOL into Yahoo as a kind of white knight move. One big difference between these approaches is that News Corp. chief Rupert Murdoch is taking the longshot approach that he could end up controlling the combined new entity. What News Corp. and Time Warner have in common, though, is that both are so-called traditional media titans anxious to sort out their digital future. A few years ago, the thinking was that Internet companies would use their comparatively rich stock market valuations to buy traditional media companies - and, indeed, that's exactly what happened when AOL swallowed Time Warner at the height of the dot-com bubble. (Time Warner owns Fortune and CNNMoney.com.)[9] Lately, Microsoft products like Hotmail and Windows Live have struggled with uptime. As these internet services crash and burn repeatedly, the internet community is beginning to question whether or not Microsoft is the right company to buy Yahoo. If they can't handle their own user load, how can they take on the even larger load that comes with Yahoo? As much as I despise AOL as a company, there is little question that AOL and Google would both be better suited for Yahoo's needs. If Time Warner / AOL and Yahoo strike a deal, source close to the negotiation say that Time Warner would split the AOL dial up service off from the online AOL services brand, make a cash investment that is greater per share than Microsoft's, merge AOL's online services into Yahoo's existing service, and control about 20% of the company altogether, with Yahoo utilizing a portion of the cash influx to repurchase its own stock. That sounds like a solid plan, though Time Warner and Yahoo have so far not verified its validity.[10] Time Warner would end up with 20% of the new YahAOLoo, but presumably not have management control. For new Time Warner CEO Jeff Bewkes, this would accomplish three things in a stroke: remove the AOL albatross that's been punishing Time Warner's share price, combine the company with its most logical partner (and away, for now, from Microsoft or Google), and keep a sufficient equity position so that if Yahoo did rebound, Time Warner wouldn't look like a chump for selling too low. Both of these new scenarios are much more complex than Microsoft buying Yahoo on its own. If that's how it plays out, it's now clear that both News Corp. and Time Warner will still be looking for a deal with their big Internet businesses, maybe even with each other - though I doubt it would end there.[9]
The board will discuss Microsoft's offer and Time Warner's plan to fold AOL into Yahoo in exchange for a 20% stake in the company. A third option is a joint deal between Microsoft and News Corp., whereby a new company would be formed combining Yahoo with News Corp.' s MySpace and Microsoft's MSN, the Journal reported, citing unidentified sources. "The stakes for this Yahoo acquisition are absolutely monumental," said Dana Gardner, an analyst at Interarbor Solutions LLC in Gilford, N.H. "This is a very big deal for Microsoft and also for Google, and if Google can't acquire Yahoo because of antitrust concerns, which is the general consensus, there would have to be some kind of a wacky partnership -- a cabal of participants -- in order to thwart Microsoft."[11] March 5: Reports emerge that Yahoo is stepping up negotiations with Time Warner for some kind of tie-up with AOL. Meanwhile, reports make the rounds that Microsoft will mount a proxy fight if Yahoo won't play ball. March 11: News Corp.' s Murdoch says publicly that he won't "get into a fight" with Microsoft over Yahoo, because the software giant has "a lot more money" than his company. April 5: Microsoft sends Yahoo a join-us-or-die letter, claiming that if the two companies can't make a deal in three weeks, Microsoft will take its offer directly to shareholders in a proxy battle. In the letter, signed by Microsoft CEO Steve Ballmer, Microsoft basically tells Yahoo board members they've run out of better options, and it would be foolish not to accept an offer immediately. Microsoft also hints that it would consider Yahoo less valuable if it is forced to mount a proxy fight, thus threatening to lower its offer.[12]
Earlier, the Wall Street Journal, which is owned by News Corp, reported that people close to Microsoft said the software maker plans to pursue Yahoo alone rather than with News Corp, which had held talks with Microsoft on a joint bid for Yahoo. The Journal also said Yahoo's board of directors met on Friday to assess their options, including deepening their negotiations with Time Warner Inc's AOL on a deal to merge Yahoo and AOL, but that no decisions were reached.[13] April 9, 2008 (IDG News Service) Yahoo Inc. is in talks with Time Warner on a deal to combine Internet operations with AOL, while News Corp. is in talks with Microsoft to jointly bid for Yahoo, the Wall Street Journal reported Wednesday.[14] April 10, 2008 (Computerworld) The fray over Microsoft Corp.' s unsolicited $42 billion takeover bid for Yahoo Inc. took a strange turn this week, and analysts are divided on what the new developments mean for the two companies. The Wall Street Journal reported yesterday that Yahoo is in talks with Time Warner Inc. to combine its Internet operations with AOL LLC in an effort to thwart Microsoft's bid.[11]
Gardner said the only deal that has legs is the potential matchup between Time Warner and Yahoo. First, Yahoo has to make up its mind about what kind of a company it wants to be -- a media company or a software company, he said. "Time Warner is among the biggest of the world's media companies, and if Yahoo partners with Time Warner, then Yahoo is a software company, and Time Warner becomes the content media company and they could make happy music together," Gardner said. "If Yahoo combines with Microsoft, then its software becomes subsumed into Microsoft, and Yahoo becomes really just a brand-media content overlay on top of the Microsoft empire." Gardner said Yahoo would probably prefer a matchup with Time Warner, which would need its software capabilities in order to be competitive. He added that it will be interesting to see if Yahoo and Google Inc. decide to extend a test announced yesterday whereby Yahoo delivers Web advertising from Google alongside its own search results. If the two companies expand their partnership, then the triumvirate of Time Warner, Yahoo and Google would be a "pretty powerful entity," he said.[11] APRIL 14, 2008 - The online media space lately has had its share of drama: Microsoft's prolonged attempt to acquire Yahoo; Yahoo's own potential partnership with AOL; rumors that News Corp. might join forces with Microsoft to combine MySpace, MSN and Yahoo in some fashion. If that weren't enough, Yahoo last week announced it would begin to test run ads from rival Google on its own search results pages. It's that last move that had digital buyers shaking their heads (and had Microsoft's lawyers screaming anti-trust). Outsourcing search to Google, if that's what Yahoo ultimately decides, "might benefit them in the short term, but it cripples their ability to become a digital powerhouse," said Bryan Wiener, CEO of 360i. Wiener noted that while Yahoo was late to the game in integrating its search and display business, the company is now one of the few Web players that can provide comprehensive ad packages--something it would give up if it cedes search to Google. "That hinders their ability to offer complete solutions," added Wiener.[15] When last seen Yahoo was experimenting with letting Google deliver ads alongside Yahoo's search results and trying to cut a deal to fold AOL into Yahoo, a possibility its own people reportedly abhor, while Microsoft, which delivered Yahoo a ultimatum that expires April 26 to submit or be taken forcibly at a lower price than offered - a threat Yahoo called "counterproductive" - was talking to News Corp about a joint run at Yahoo. Now Yahoo had another board meeting over the telephone on Friday - apparently without any resolution on the AOL deal - suggesting it is merely posturing - and Reuters is reporting that Microsoft still prefers its original deal structure and price of $31 a share without entirely ruling out a News Corp angle somewhere.[16]
Based on current stock prices, the value of Microsofts proposed cash-and-stock bid for Yahoo is $42.1 billion. "This doesnt put an end to the negotiations, but it perhaps balances things out," Cowen and Co analyst Jim Friedland said. "It looked like Microsoft had all the cards. Yahoo is at least now able to use this for leverage to get Microsoft to pay more." A full-scale deal with Google would boost Yahoos cash flow by reducing spending on rival technology and allow it to redirect staff and resources into its larger business selling corporate brand advertising such as banner ads, the analyst said. Yahoo could also step up its focus on areas where it leads such as online news, finance and sports, he said.[17] Wall Street analysts still think that an AOL deal is somewhat less likely than an eventual purchase by Microsoft, particularly now that News Corp. is considering joining forces with Microsoft for a joint bid that could combine Yahoo, MySpace and MSN into one giant online entity. Yahoo has also been flirting with Google, as it yesterday announced a trial partnership to use the search giant's advertising against a small percentage of its search traffic.[8] Then Yahoo disclosed a trial of Google's AdSense for Search in a limited set of search results for a two week period; no other potential Google/Yahoo closeness has been revealed. AOL and Yahoo have been in discussions to bring the Internet businesses together, as a way to keep Microsoft from winning its bid for Yahoo. Since Yahoo angled for more money out of Microsoft, as Yahoo bitterly resents being undervalued by Wall Street, Microsoft reportedly began talking to News Corp about bringing them on board in a Fox Interactive Media/Yahoo/MSN arrangement.[18]
The Journal reported, however, that News Corp. may join Microsoft in the bid for Yahoo, although the newspaper did not say how much the offer might increase nor how the two companies would split ownership of Yahoo. Yesterday, Yahoo said it would begin a limited test to deliver Web advertising from Google with its own search results.[14]
Then the idea would be for Yahoo to use Time Warner's money to buy back a few billion dollars worth of stock for somewhere between $30 and $40 a share to pacify investors watching Microsoft and its money walk out the door, which could crush Yahoo's stock. Yahoo, despite antitrust issues, said it's going to try letting Google deliver ads alongside Yahoo's search results to test the revenue potential of an outsourcing arrangement, apparently to substantiate that it's worth more than Microsoft's offer.[16] Aside from Microsoft's February offer of $31 per share, or $44.6 billion to acquire Yahoo, Chairman Roy Bostock and the other nine board members were believed to be considering a merger with Time Warner's AOL unit. That deal reportedly would give Time Warner a 20 percent stake in Yahoo and provide funds to allow management to launch a stock buyback program that could, at the least, force Microsoft to increase its offer.[19] The deal would be valued at around $10 billion, and would not include AOL's dial-up Internet access business. Yahoo would use cash from the Time Warner deal to buy back several billions of dollars worth of its own stock. Time Warner is under pressure to find a strategy for AOL because it has lost a lot of value since their merger in 2000, the report says.[14] It started to look that way on Wednesday, as it came out that Yahoo has been contemplating a merger with AOL as a way out of getting acquired by Microsoft, a situation that Yahoo CEO Jerry Yang and chairman Roy Bostock seem almost desperate to avoid. As contemplated, the deal would see Time Warner giving its troubled AOL unit's content and advertising operations to Yahoo, along with some cash, in return for about 20% of the combined entity. Time Warner would keep AOL's Internet access business, which Time Warner CEO Bewkes has already said he intends to spin off or sell.[8]
In an arrangement that bypassed the usual subjects, AOL, a division of Time Warner (NYSE: TWX ) will handle selling Verizon's online inventory through the web portal's advertising network and marketing operation called Platform A. According to Reuters, " The Verizon ad deal, whose price was not disclosed, will give Platform A the right to represent all of Verizon's advertising space on the Internet, including premium space." In the last year, Google, Microsoft, and Time Warner have all made purchases of businesses that will help them sort, target, and sell online ads. Large web operations like Facebook and MySpace have already cut deals for having one of the large portals or search companies to sell their inventory, but AOL has not been in that mix. It looks like the incumbents for online advertising representation have a new competitor.[20] '''More wireless customers choose the Verizon brand than any other, and Verizon has the fastest-growing fiber optic Internet service in the country, and we look forward to helping marketers reach the right people in engaging and measurable ways.''' Today: AOL officially opened its New York headquarters and it opened a Taiwan-based Web portal (AOL has launched 18 portals so far and hopes to launch a total of 30 this year as part of its international growth plan). All of this comes amid Time Warner'''s (AOL'''s parent company) talks to combine AOL with Yahoo Inc. to topple Microsoft Corp.'''[21] Google, based in Mountain View, slid $11.63 to $457.45, and Redmond, Washington-based Microsoft dropped 83 cents to $28.28, and is 21 percent down since the start of the year. Yahoo also considered a plan this week to swap a 20 percent stake in the company for control of AOL, plus a cash investment from AOL parent Time Warner Inc., a person with knowledge of the talks said.[22]
Yahoo rejects that price as too low and has been casting around for other partners. It announced last week a test to outsource search advertising to Google, which sources say is part of Yahoo's plans to form a three-way alliance with Time Warner Inc's (TWX.N: Quote, Profile, Research ) AOL to fend off Microsoft. Antitrust experts said regulators would likely oppose any permanent alliance between Google and Yahoo, while they would likely approve Microsoft's proposed merger with Yahoo.[23] Microsoft obviously wants to absorb Yahoo to mount a more formidable challenge to Google in search engine advertising, as well as take a larger share of the search budgets of advertisers. That's a good thing, advertisers say, because a united Yahoo-Microsoft could help make pricing more competitive. It remains unclear to companies that advertise with Google whether a Yahoo-Microsoft combination would change their spending. One ad executive at a major agency, who asked to remain anonymous, said a Yahoo-Microsoft alliance wouldn't take away from how much money he spends with Google, nor potentially how little he spends with Yahoo or MSN. The executive admitted that advertisers like him have likely contributed to the anticompetitive climate that exists today, giving Google the edge in ads and traffic. When asked whether a Yahoo-Microsoft merger might cause his agency to spend more with the combined entity, he said "maybe." Another advertising industry observer took a more negative attitude when it came to a Yahoo-Microsoft alliance. "With Yahoo and Microsoft, you're taking two companies who are spending all their time copying each other's ideas--the company that created Yahoo Answers and the company who ripped them off by creating Live Q&A.; Why does that change my ad budget?" asked Chris Tacy, chief innovation officer at Method, a branding company in San Francisco.[24]
More than half of the $41 billion online advertising market comes from Internet search ads, according to Piper Jaffray & Co. Google captured 77 percent of spending in the fourth quarter, compared with Yahoo's 18 percent and Microsoft's 5 percent, said Efficient Frontier Inc., a Mountain View, California-based company that manages online ad campaigns.[22] Google accounted for 59.2 percent of Internet queries in February, according to Reston, Virginia-based researcher ComScore Inc. Yahoo had 21.6 percent, followed by Microsoft with 9.6 percent. Ballmer is interested in Yahoo because it would boost his company's slice of the online advertising market, which Microsoft said may nearly double to $80 billion by 2010.[25]
In a move possibly designed as an end run around Microsoft's bid, Yahoo execs have decided to do a test placement of Google ads on the Yahoo family of sites, and to join forces with Time Warner / AOL. A partnership between Yahoo and AOL would give the struggling internet company enough clout to fight off a Microsoft bid, especially if the test of Google ads on its site is successful.[10] The flirtations and betrayals among Internet giants would steam up even the hottest afternoon soap opera. In the latest round, the News Corporation, which had been playing footsie with Yahoo, has jumped into the arms of Microsoft in an effort to break up the pending union of Yahoo and Time Warner's estranged wife, AOL. Oh yes, Google, which everyone envies, is prodding all this on to keep its rivals in a state of confusion. What does all this mean? It shows that Jeff Bewkes, the chief executive of Time Warner, is now more open to leaving AOL than in the past.[26] In what could turn out to be a wave of upheaval among major Internet and media powers or just a bunch of ultimately fruitless posturing at least four different could-be combinations including Microsoft, Yahoo, Time Warner's AOL, News Corp. and Google were rumored or already on the table.[6]
Yahoo is still looking for alternative deals it can bring to shareholders and is in ongoing talks with Time Warner's AOL. Brad Smith, Microsoft's general counsel, reiterated its view that it has made Yahoo a fair offer, and raised concerns about the Google deal.[27] Yahoo, facing a three-week deadline from Microsoft to reach a deal and eager for a higher offer, also is still in talks with Time Warner Incs AOL about a potential tie-up, a source familiar with the discussions said.[17]
The agreement expected to be announced on Monday, an AOL executive said, comes amid Time Warner's ongoing talks to combine AOL with Yahoo Inc to rival Microsoft Corp's estimated $42 billion offer to buy Yahoo.[28] Yahoo! (Nasdaq: YHOO ), fighting off offers from software behemoth Microsoft (Nasdaq: MSFT ) since February, is now in talks with former Internet juggernaut AOL, the Internet division of Time Warner (NYSE: TWX ).[29]
Third Screen Media's mobile advertising options include geographic, demographic, content targeting and display. Reports of Time Warner's talks to combine Yahoo and AOL, values AOL at around $10 billion, not including its dial-up Internet service. "We felt that Platform-A's combination of advertising assets allowed us to take advantage of the industry's best publisher solutions to maintain this commitment, while providing the greatest overall value for our inventory," said John Harrobin, senior vice president of digital media and marketing, Verizon. "We have been working with Platform-A's mobile ad serving platform, Third Screen Media, for more than a year now, and they have done a great job connecting large brand advertisers with our mobile network."[30] Yahoo! held a board meeting yesterday to review how far its discussions with Time Warner about a white knight rescue were progressing, although any agreement is still thought to be a fortnight away. Yahoo! is also hoping that its newly announced deal with Google, in which Google will provide it with search engine advertising, could materially boost the valuation of Yahoo! Google is only working with Yahoo! on a trial but analysts believe that a tie-up, were it approved by regulators, could boost Yahoo!'s cashflows by $1 billion a year.[31] Yahoos two-week test of Googles search advertising technology could lead to a broader deal. Citigroup analysts Mark Mahaney and Brent Thill estimated a full search outsourcing deal could generate more than $1 billion in cash flow to Yahoo, though they also say a Microsoft deal is the "most likely outcome."[7] Lindsay said a deal outsourcing search advertising to Google could raise Yahoo's stock price to between $39 and $45. That could make Yahoo too expensive, even for Microsoft.[27] The merge-with-AOL threat isn't particularly potent as an alternative--although Yahoo or Microsoft should certainly buy AOL--but the Google search deal could deliver immediate, permanent economic value to Yahoo. This should make it easier to persuade Microsoft to pay a bit more, in part because Microsoft will then be able to fire Google and use its own search technology. Unfortunately, there is still at least some risk that this melodrama will end by Microsoft walking--in which case Yahoo's stock will drop to $20.[32]
Predictably, Microsoft was none too happy about the news and spared no time pointing out all the ways that kind of union could run into regulatory problems, because it would give Google and Yahoo 90 percent of the search-advertising market. News Corp. recently had been considered a possible spoiler to Microsoft's plan, but CEO Murdoch shot down those rumors in March. A deal to go in with Microsoft to buy Yahoo would at least give his company a piece of the action.[12] The New York Times has reported that Microsoft is talking with Journal publisher News Corp. about a joint bid for Yahoo. Yahoo's fate "will come down to what its shareholders want to accept," RBC Capital Markets analyst Ross Sandler said in a note to investors. Sandler noted that Yahoo's management owns less than 10 percent of the company, and said it is "doing the right thing by entertaining (or proposing) all these ideas for shareholders in an effort to extract more value."[33] Hours later, the worlds largest software company appeared to trump Yahoos announcement as the New York Times reported that Rupert Murdochs News Corp was in talks to join Microsofts $42.3 billion (21 billion pounds) bid for the Web pioneer.[7]
News Corp., owned by Rupert Murdoch, is in talks with Microsoft to jointly bid for Yahoo. Yahoo is trying to fend off a takeover bid by Microsoft or, at least, to get Microsoft to raise its offer. Microsoft, which wants to acquire Yahoo to gain a stronger foothold in the online advertising market, hasn't raised its offer. If it took on a partner, such as News Corp., it might be willing to pay more, analysts said.[11] As Yahoo! (nasdaq: YHOO - news - people ) blows hot and cold -- more cold -- about teaming up with Microsoft and casts around for other partners, the outlook is getting increasingly unclear. "This is the first time that we have seen real feasible alternatives that could derail the Microsoft deal," said analyst Jeffrey Lindsay of Sanford C. Bernstein. Microsoft's chief operating officer said at a news conference in Mumbai that his company had made a fair offer to Yahoo! and that no matter what happened with the deal, the company was determined to grow in online advertising capabilities.[34] "A Yahoo-AOL merger does not provide Yahoo shareholders value equivalent to the existing Microsoft bid." A Piper Jaffray & Co. survey of 20 shareholders indicated a majority would favor Microsoft's cash-and-stock offer to no deal, analyst Gene Munster said in a note this week.[35] Boca Raton, Florida-based Moran advises investors to hold on to Yahoo shares. A Piper Jaffray & Co. survey of 20 shareholders indicated a majority would favor Microsoft's cash and stock offer to no deal, analyst Gene Munster said in a note this week.[25]
Google's legal chief, David Drummond, publicly attacked the deal when it was announced. "Could the acquisition of Yahoo allow Microsoft - despite its legacy of serious legal and regulatory offences - to extend unfair practices from browsers and operating systems to the internet?" said Drummond. His answer, unsurprisingly, was "yes". Next week Yahoo will release its latest financial figures. Some analysts believe that Yang is delaying a decision on Microsoft in the hope that the results will reassure shareholders that the company can go it alone, or at least put pressure on Ballmer to increase his bid.[2] On Wednesday the Internet company said it is testing Google's AdSense for Search service, acting as one of the Web publishers that carry pay-per-click text ads from Google. The move opens up the possibility that eventually Yahoo may outsource its paid-search business to Google, which might provide a way out of having to make a deal with Microsoft.[12] While Yahoo is seeking a business partnership with Google -- unlike the outright merger that Microsoft (MSFT.O: Quote, Profile, Research ) wants -- legal experts say any deal between the world's two largest Internet search services will draw heavy scrutiny from U.S. and European competition regulators.[23] Microsoft Corp.' s takeover bid for Yahoo Inc. has yet to succeed, but that hasn't stopped preparations for what would be the next step -- the regulatory battle. Both Microsoft and rival Google Inc. have started opposing campaigns to woo public interest groups in Washington, D.C., as part of a broader lobbying effort aimed at knifing each other in the back. The Center for Digital Democracy and Consumers Union, two organizations that often pressure antitrust regulators to block mergers, have held a number of discussions with both companies. "They'll do anything to attempt to undermine each other," said Jeff Chester, executive director of the Center for Digital Democracy. It's a window into how competition plays out in Washington, where gaining allies or muting criticism is an important part of corporate strategy. The gamesmanship can help sabotage a challenger's plans or limit them. With its bid for Yahoo, Microsoft hopes to bolster its online business by creating an Internet colossus.[36]
"Any definitive agreement between Yahoo and Google would consolidate over 90 per cent of the search advertising market in Google's hands," it warned in a statement. Outsourcing search ads would allow Yahoo to focus on its more lucrative display ad business. Joining the fray is News Corp, which insiders say is in talks with Microsoft to create a triple threat venture, blending Yahoo with both firms' Internet divisions.[4] ' In a major poke at Microsoft, Yahoo announced recently it will begin running Google's search ads alongside some of Yahoo's search results. Yahoo said it will conduct a limited test on up to 3 percent of its search queries, lasting as long as two weeks. Yahoo hopes to evaluate the potential of a more extensive agreement with Google, in which it would outsource all its search advertising to Google. Wall Street analysts believe Yahoo could significantly improve its profitability by doing so because its Mountain View, Calif., rival makes so much more money for each search.[27] The changes are part of Yahoo's overhauled search ad system, called Panama, which has enabled a series of changes over the last year and a half. One change was the ability for Yahoo to assign a quality ranking to each advertiser based on factors such as how often users click on their ads. Another was discounts to the price advertisers pay when users click on ads hosted on non-premier sites that use Yahoo for serving up ads. Yahoo has been trying to improve its search-ad results to boost its business, attract more advertising, and better compete against leader Google. Google has been adding refinements of its own, changes that yielded fewer clicks on ads but more revenue per click. The competition has been going on for years, but it's under more intense scrutiny with Microsoft's attempt to acquire Yahoo. The seriousness of the situation for Yahoo was spotlighted earlier this week when Yahoo announced a limited test of Google's search-ad delivery system alongside Panama. Google makes more money per click on its search ads than Yahoo, so using Google's ads could theoretically increase Yahoo revenue depending on how the proceeds were divided.[37] The test is slated to run for two weeks and will affect an estimated three per cent of search requests on Yahoo's main U.S. portal. Yahoo last month admitted Google search ads generate more than 60 per cent than its own on average, but executives have resisted outsourcing for some time and previous alliance talks failed. Microsoft lashed out against the possibility of losing its Yahoo gambit and intimated the Google trial would face regulatory backlash.[4] In the middle of the week, Yahoo said it will begin a limited two-week test of rival Google Inc.' s AdSense for Search service, through which some Yahoo search results will show Google ads. The experimental alliance could lead to a broader partnership, and, according to a Wall Street Journal report, Yahoo is looking into combining its Web operations with those of Time Warner Inc.' s struggling AOL unit.[33] A deal with Time Warner and AOL would be part of a multi-pronged strategy by Yahoo in which it would outsource Web search advertising operations to Google Inc, the source said.[38] "What will it do for budgets? In the short term, probably nothing," McDougall said. What's more intriguing to advertisers are the possibilities of partnerships between Yahoo and News Corp. (and its MySpace.com social network) or Yahoo and AOL. Many advertising executives say it's easier to see deals for long-term creative advertising across Yahoo and MySpace, or across Yahoo and Time Warner's AOL. Combining brand advertising, targeted behavioral ads, and search ads seems appealing to the advertising community.[24] The Microsoft - News Corp - Yahoo option, should that be proven as more than just speculation, would possibly be more complicated than helpful. Because each entity is a heavy hitter in its own right, the direction of the company and the future of aspects like an ad revenue split are not as clear cut as the Time Warner / AOL possibility.[10] "Given the market value for (Time Warner) and (Time Warner Cable) and our estimated fair value for Time Warner Content, the market is implicitly assigning nearly ZERO equity value to AOL," noted Bernstein Research in a new report. Despite such downbeat assessments of AOL's future, the deal under discussion with Yahoo values AOL at about $10 billion. Owning 20% of a separate public company that could be the cure Time Warner's long-festering AOL problem, as it would take responsibility for its performance off of the hands of Bewkes and his lieutenants.[8]
The NYT notes, for example, that the board "authorized" the AOL and Yahoo meetings, phrasing that was probably designed to blunt the criticism in Steve Ballmer's letter that the board hadn't even authorized the company to negotiate with Microsoft. The Microsoft meeting could be a sign that Yahoo is finally ready to negotiate, but more likely is intended to demonstrate that Yahoo's board is acting reasonably and "exploring all its options." The AOL meeting, meanwhile, serves the dual purpose of allowing Yahoo to continue to explore an AOL deal while also showing Microsoft that it's serious about exploring one. The AOL deal terms in this story remain the same as the early ones: AOL's portal and ad network businesses valued at about $10 billion, in exchange for 20% of Yahoo.[39]
Yahoo, based in Sunnyvale, California, fell 25 cents to $28.34 in Nasdaq Stock Market trading at 4 p.m. New York time. The stock has gained 22 percent this year. Microsoft shares fell 83 cents to $28.28 and have declined 21 percent this year. Yahoo spokeswoman Tracy Schmaler declined to comment, saying the company doesn't confirm when its board meets.[25] According to the rumor mill, Yahoo is now looking for closer to $40 a share because the value of the company has risen since the offer. Feb. 12: Microsoft for the first time publicly hints in a letter to Yahoo that it is willing to get hostile in its takeover, saying it "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."[12] The new Yahoo would then buy back some shares at more than $30 per share, exceeding the value of Microsoft's approximately $29 per share offer. That would presumably incentivize shareholders to reject Microsoft's bid, which the tech giant has threatened to turn hostile after it was rejected by Yahoo's board.[8]
Yahoo! is offering to accept AOL in return for a stake of about 20 per cent, valuing AOL at around $10 billion. Yahoo! has rejected Microsoft's hostile bid but its share price remains just below the offer level at $28.35, down 24 cents.[31] Microsoft doesn't appear to be backing off yet. It has said it may lower its bid _ which was initially valued at $44.6 billion, or $31 per share _ if Yahoo doesn't accept the offer by April 26.[33]
"We have every intention of being a significant player in search, and paid search is an important part of our business.'' Amid criticism that Yahoo's efforts have fallen short in wringing more money from Internet search ads, Decker and Chief Executive Officer Jerry Yang agreed this week to try Google's software as they negotiate alternatives to Microsoft Corp.' s $44.6 billion takeover offer.[22] The source also believes that the fact that the Google-Yahoo search test is obviously a response to the Microsoft bid, combined with Google's public reaction to the bid and reported offer to help Yahoo resist the bid, would provide plenty of fodder for attorneys to argue that the outsourcing deal represents an "agreement" between Google and Yahoo.[40] A rumor that Microsoft and News Corp., which owns social-networking giant MySpace, were talking about a joint bid for Yahoo added more noise and confusion. There was speculation that such a combo could also result in a raised price for Yahoo. Parakh said the swirling deals are likely distracting management and rank-and-file at all the companies involved from their efforts to catch Google.[6] The Associated Press called it a "last-ditch effort" to prevent a Microsoft takeover at all costs. Not willing to sit idly by and still determined to bring Yahoo into its portfolio, Microsoft is also hashing out a potential deal with an online giant, News Corp. The media conglomerate owns a ton of Internet entities under its Fox Interactive Media brand.[41]
Charles J. Di Bona, an analyst for Sanford C. Bernstein, wrote the obvious question here in a note Thursday: If AOL and News Corporation are willing to deal, why does Microsoft need Yahoo at all. YHOO would truly be left on its own as even an outsourcing deal with GOOG would be immediately challenged on antitrust deal and the uncertainty of what is likely to be a prolonged review could significantly impair YHOO's business in the interim regardless of the ultimate outcome.[26]
The Yahoo-Google search test (YHOO) was the most important news in a flurry of Microsoft-Yahoo events last week (MSFT): If the test becomes a full-scale outsourcing deal, most analysts agree that this would drive an immediate, material increase in Yahoo's operating profit, perhaps as much as $500 million a year. Microsoft immediately responded to the test news by suggesting that a Google-Yahoo partnership (GOOG) was illegal and threatening to use whatever "options" it had at its disposal to block it.[40] Analysts believe the rivals will either broker a friendly transaction before the end of the month or wrestle for the allegiance of Yahoo's shareholders in a prickly showdown that could drag into the summer. A new twist emerged Wednesday as Yahoo surrendered some of its advertising space to Internet search leader Google Inc. in a test that appears designed to frustrate Microsoft.[42] Microsoft hasn't given up hope, though: Some reports say Mr. Softy''is considering a joint bid for Yahoo! with Rupert Murdoch's News Corp. (NYSE: NWS ), owner of MySpace. Yahoo! has just announced that it will test the use of Google's (Nasdaq: GOOG ) AdSense advertising engine in some of its search results.[29]
Yahoo's resistance to Microsoft's offer of $31 per Yahoo! share, made on Feb. 1, recently took a turn when Google (nyse: GOOG - news - people ) it announced a two-week "trial advertising" partnership with Yahoo![34] According to estimates from eMarketer, Google's share of the American market jumped to 28.4% last year from 13.1% in 2004. As the online ad market matures and big brands shift more of their campaigns online, display advertising, such as banner ads and video ads, are expected to be the next growth area. Yahoo makes an attractive partner because of its huge audience - 137m American visitors in February - ahead of Google, Microsoft, AOL and MySpace. As a solo business Yahoo is beginning to look old-fashioned and faces increased competition from social networks such as Facebook and video sites like YouTube.[2] Google, plus AOL and Ask.com, represent 70 percent of the U.S. Web search audience, according to comScore. Were Yahoo to throw its search business to its competitor, Googles share of the U.S. Web search market would top 90 percent. Since Google is better at turning search traffic into ad dollars than Yahoo and Microsoft, its actual share of revenue in this business is underestimated by search statistics.[17] Yahoo has traditionally led in graphical display ads, a more fragmented business. Google derived almost all its $16.6 billion in revenue last year from small text ads alongside Web search results on its sites and affiliated partner sites such as AOL and Ask.com.[17]
Even the advertising growth is still far behind that of red hot competitors like Google. Yahoo has also had its problems but is still performing better than AOL in most categories and could boost its performance and significantly reduce costs. The two overlap in a number of traditional Web content areas, from movies to news to music, but would bring a few individual strengths such as AOL's popular instant messenger and Bebo, along with Yahoo's search technology. Together they would likely dominate the portal business, driven by display advertising, and possibly pose a stronger threat to Google and Facebook.[8]
Microsoft is charging hard after Yahoo as a way to quickly gain the scale needed to challenge Google's dominance in online search and advertising, the Internet's revenue source. "It's all kind of driven by Microsoft's fixation on Google and trying to compete better and monetize their traffic more effectively," said Sid Parakh, technology analyst with McAdams Wright Ragen.[6] In a statement, Microsoft General Counsel Brad Smith said Yahoo and Google would consolidate over 90 percent of the search advertising market in Googles hands. Smith added that Microsoft was assessing all of its options. His comments responded to Yahoos announcement earlier on Wednesday that it will carry Web search advertising from Google in a test.[43] "Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search advertising market in Google's hands,'' Microsoft General Counsel Brad Smith said in an April 9 statement. "This would make the market far less competitive.'' Conducting the test with Google doesn't necessarily mean the companies will strike a formal partnership, Decker said in her memo.[22]
Google, the leader in online search advertising, casts a long shadow over the meeting. Microsoft sees the acquisition of Yahoo as central to its strategy of competing with Google. That's why Yahoo's announcement earlier this week that it plans to conduct a limited test that would pair Google's AdSense network with Yahoo's search results struck a nerve at Microsoft headquarters in Redmond, Washington.[19]
Last year's Trademark Protection Act, had major implications for search advertising. In the months after the bill passed, firms including AOL, Google, Microsoft, and Yahoo met with Utah state congressmen, pushing for amendments to the bill, which they opposed. Late night committee hearings and meetings in Utah this March resulted in altered legislation Google and others lauded.[44]
Apart from search, a Microsoft-Yahoo marriage could make the two more forceful in content and brand advertising, an area of weakness for Google. The search giant is trying to break into brand advertising with video on YouTube and graphical ads on its ad network. So far, Microsoft hasn't pitched the advertising community on why a Microsoft-Yahoo deal would be strategically interesting for their advertisers. Grant McDougall, executive vice president at advertising agency Carat--which plans media buys for Ecostar, the Gap and Pfizer, among others--said Microsoft could bring more discipline to Yahoo in terms of improving its marketing-analytics tools, but he has yet to hear the reasoning from Microsoft.[24] Microsoft fired back saying that a deal between Yahoo and Google would make the market for Web search less competitive -- turning the tables on Google, which has charged Microsoft with anti-competitive practices in the past. Microsoft would face tough scrutiny of its own from regulators if it buys Yahoo.[17]
Yahoo and Google, meanwhile, would presumably argue that outsourcing is just a smart business move for Yahoo, one that many Yahoo analysts have been recommending for years. That the move comes in response to Microsoft's bid is irrelevant, the argument will probably go: It's still a unilateral buy versus build decision. Even if a Yahoo-Google search partnership were patently illegal, which we don't believe it is (the arguments seem reasonable on both sides), we believe it would take several months to get a summary judgment and/or injunction. More likely, litigation surrounding the partnership will continue for years, long after any of this matters to the current Microsoft situation. For practical purposes, Microsoft won't want to take the risk that the Google-Yahoo partnership passes muster with the regulators, so it will likely increase its bid as a way of avoiding this risk.[40] For nearly 10 weeks, Yahoo has been frantically searching for alternatives to Microsoft's $40 billion-plus bid. Wednesday, the company said that it would outsource a small part of its search-advertising business to Google, in a two-week test that could lead to a broader partnership.[45]
Microsoft Chief Executive Steve Ballmer gave Yahoo three weeks to accept a bid of $31 per share or face a hostile takeover at a lower price. Yahoo Chief Executive Jerry Yang and Chairman Roy Bostock responded they would consider a deal only at a higher price.[27] Whether Mr. Haverty would actually vote for the deal, which Mr. Yang will reportedly put before shareholders, is another question. If it can induce Mr. Ballmer to raise his bid to at least $35, as other shareholders like Legg Mason portfolio manager Bill Miller are demanding, it will serve its purpose. At a bare minimum, it makes it difficult for Microsoft to lower its bid, as Mr. Ballmer has threatened to do if the Yahoo board doesn't come to the table. 'It's problematic for Microsoft in that it sets a floor price for Yahoo,' said Jeffrey Lindsay, an analyst with Sanford Bernstein.[3] There is still a lot of work to do before a deal is reached, the paper reported. Microsoft has already offered Yahoo shareholders a combined cash and stock deal valued at $42 billion, and has stated several times that it will not raise its bid.[14] Every time something happens that makes a Microsoft takeover less likely--a merger with AOL, for example--Microsoft's stock goes up. Why? Because, on balance, Microsoft shareholders don't like this deal, or at least don't like how much Microsoft is paying for Yahoo.[32] Yahoo is on the verge of a merger deal with AOL and will likely escape a threatened hostile takeover by Microsoft, according to insiders cited by Reuters and the Wall Street Journal.[4]
Even once a deal is made, it will be years before anyone reaps a reward from what could turn out to be an unwieldy mega-merger. May 2006: Some of the earliest rumors that Microsoft is considering an offer to buy Yahoo appear in the New York Post and The Wall Street Journal; at the time such a deal is considered far-fetched, so the rumors are dismissed fairly quickly.[12] Talks with News Corp, which earlier had discussed working with Yahoo as a counter to Microsoft, are at a sensitive stage, the New York Times said. The Wall Street Journal called those talks "serious."[7] Separately, The New York Times reported that Microsoft and Rupert Murdochs News Corp are in negotiations on making a joint bid for Yahoo. That merger would join Yahoo, Microsoft Corps MSN and News Corps MySpace, the paper said.[38] "There's a long way to go before anything is definite," a source told the New York Times. The ploy comes weeks after Yahoo is known to have approached the MySpace parent to discuss joining to fend off Microsoft and could grant the software giant strong enough backing to finally raise its $42 billion bid.[4] Yahoo Inc.' s directors met Friday to consider Microsoft Corp.' s $44.6 billion bid for the Internet company, Bloomberg News reported, citing a person familiar with the situation.[35] April 11 (Bloomberg) -- Yahoo! Inc. directors meet today to consider Microsoft Corp.' s $44.6 billion bid for the Internet company, a person familiar with the talks said.[25]
What do you get when you put, Microsoft, Yahoo, AOL and News Corp. together? A company that makes software that isn't suited for todays's computing needs, a mediocre search engine and second class ad network, the world's largest collection of dial up Internet users and a news organization that appeals to Dick Cheney.[26] Later came two unconfirmed reports: Yahoo is considering absorbing AOL in exchange for a big investment from AOL parent Time Warner, and Microsoft might get some help from News Corp. to acquire Yahoo, a move that could provide acquisition funding and add News Corp.' s MySpace.com into the mix.[46] As News Corp and Time Warner join the scrum surrounding Yahoo, it's clear that big media is not content to leave Google or Microsoft alone on top of the digital mountain.[9] Founder Jerry Yang took back the helm at Yahoo last summer after the departure of veteran media executive Terry Semel. Yang is a tech genius but few thought he had the corporate savvy to shake off Ballmer. Last week he made his most concerted effort to wriggle free by reaching out to Time Warner's AOL and to Google, Microsoft's arch enemy.[2] Yahoo has courted Time Warner Inc.' s AOL and is testing advertisements from Google Inc. to thwart Microsoft's offer.[25]
Platform A is the centerpiece of a restructuring of the once great Internet division responsible for generations of first time Internet surfers. Reports of Time Warner's discussions to combine Yahoo and AOL values AOL, excluding its dial-up Internet access business at around $10 billion. That is a far cry from the zero value ascribed to AOL within Time Warner's current valuation, according to analyst estimates.[28] Various reports added that in addition to AOL, Time Warner would give Yahoo as much as $10 billion and get a 20 percent stake in the Internet company.[45] The other options are more complex. In an AOL transaction, Yahoo would gain control of the Internet company, receive an investment from Time Warner and give up a 20 percent stake in the combined entity, a person with knowledge of the talks said this week.[25]
The newspaper's Web site cited unnamed sources as saying that Time Warner had been expecting Yahoo's board to move closer to backing an AOL deal and that Yahoo's delays suggested that the company was hesitant to proceed.[13] A Yahoo-AOL deal would involve Time Warner folding AOL into Yahoo and making a cash investment in return for about 20% of the combined company, the Journal said.[14]
Thursday, two sources familiar with the matter said Yahoo is in serious talks with Time Warner to put together a complex deal involving AOL.[45] October 2006: Rumors begin to swirl that Yahoo has approached Time Warner about purchasing AOL, a notion that is somewhat more believable than a Microsoft-Yahoo deal.[12]
Sources say the test is part of a planned three-way alliance to combine Yahoo with Time Warners AOL instead of Microsoft.[7] Spokesmen for Microsoft, News Corp, Time Warner and Yahoo were not immediately available to comment.[13]
Analysts noted that with some combination of Yahoo, Microsoft and Google looking likely, AOL and News Corp.' s Fox Interactive Media are eager to not be left out.[8] SCOTT FULTON: I would think their major shareholders have a monetary investment in the technologies that Yahoo is developing, and all the stuff that they've acquired, including the Right Media Exchange and all these new properties -- all that stuff would fall by the wayside if Microsoft got a hold of it. want that. They just want the employees and they want Yahoo out of the way. I would think that these major shareholders would say, "Well, if I'm not going to see any return on our investment after all these years of working on Panama and Right Media and these other projects, then I'm gonna vote it down." Now, here's a scenario where at least most of these things can stay alive. Would the Yahoo brand, and so would its independent stake as a competitor against both Google and MSN. I would think that major and minor shareholders would be overjoyed by this.[47] In recent years AOL, Microsoft's MSN and Yahoo have all lost market share to Google.[2] A graph of the share of Internet advertising revenue sold by the four big players is a stark map to the current merger mating game: Google is heading higher while AOL, Yahoo and Microsoft sink.[26] Today, AOL announced that Verizon has selected Platform-A as a major ad provider of its online and mobile Web properties. This announcement is widely seen as a major victory for Platform-A as Microsoft Corp., Yahoo Inc. and AOL continue to battle each other for larger pieces the interactive advertising pie. Verizon will leverage Platform-A'''s sales capabilities for all of its online inventory and the lion'''s share of its mobile inventory. It will also be the only sales organization that can represent Verizon'''s inventory in the marketplaces. '''We'''re pleased to have the opportunity to work with a great partner like Verizon to manage and monetize their online and mobile advertising inventory,''' Clarizio said in a release.[21] Suprisingly, advertising hasn't figured it out. From the intial annoying pop-ups, to targeted links, it seems that ad agencies and google are trying to reach consumers along a different path than consumers trying to find products and information they want. (Some online stores are better than others.) When it comes down to it, who cares about yahoo, microsoft and aol? I don't think they get it. If they did, I could select the ads and commercial content to support the free TV, Newspaper, and Novels I really want.[26]
Advertising executives on Madison Avenue, who have always liked to watch a good fight, are more bemused by the Yahoo-Microsoft action than concerned by which company wins. Ad firms have a big influence on the future of Google, Yahoo, MSN, AOL, and News Corp. by deciding on behalf of clients how much of their budgets to spend with each company, if at all. While the players are important, advertisers don't really seem to care which teams are aligned, as long as they can provide the audience, the ad space, and the return on investment for clients.[24]
In a letter signed by Chairman Roy Bostock and CEO Jerry Yang, the company calls Microsoft's threat of a proxy battle "unproductive," and says it would consider a deal if Microsoft was willing to pony up more dough. April 9: Yahoo says it is testing the display of Google search ads in a small number of its search-engine queries, a move seen as a way to stave off Microsoft's advances.[12] Microsoft General Counsel Brad Smith said Yahoo and Google would consolidate more than 90 percent of the search ad market in Googles hands. Herb Kohl, the Democratic head of the U.S. Senate antitrust subcommittee, chimed in to say he was watching Yahoos deal closely to "ensure it does not harm competition."[17]
Jeffrey Lindsay, an analyst with Sanford Bernstein & Co., said a deal with Google "has a real chance of saving Yahoo." In a research note published in September 2007, Lindsay calculated Yahoo could boost its operating income by $565 million in 2008, or as much as 33 percent, if it handed over search advertising to Google.[27] Mark Anderson, a technology analyst and adviser based in Friday Harbor, called the deals Yahoo was reportedly pursuing last week "wacky." One such play, which immediately drew scrutiny on antitrust grounds from lawmakers and regulators, has Google presenting advertising next to Yahoo's search results in a limited test.[6]
The deal, which will include no more than 3 percent of search queries during a trial lasting as long as two weeks, may be another way for Yahoo to bolster revenue as an independent company. Lawmakers already have said they would examine a Yahoo- Google tie-up if it were made permanent, throwing doubt on whether that is a long-term solution for Yahoo investors.[25] Yahoo is not opposed to doing an eventual deal with Microsoft at a higher price, said a source familiar with Yahoos thinking. A Google deal would represent a short-term measure to help the company shore up its own revenue.[17] Of course, the question is, will the market concur and will the market bolster the share price in response? Because at the end of the day, that's really the only thing that matters. It doesn't matter what one block of major shareholders thinks; it really matters what the entire market thinks. So far, since the deal was announced, the market has pretty much yawned and driven the stock value down, because they continue to not have confidence that the company on its own will be a viable, long-term concern. At the end of the day, shareholder value is really the only thing that matters, and thus far, Yahoo as an independent company hasn't sent those broad-based messages to the market that it's capable of bolstering and improving that value proposition over time.[47] Consequently a deal in terms of the value to yahoo shareholders realized over that time (unless purely 100% cash), whether immediately seen as more favorable than MSFT's initial proposal or of lesser value than the current value of $15.50 plus.47545 shares of MSFT stock (just not too much lesser), might in only a short time be looked back upon as having relatively little consequences from an argument over a "couple of bucks."[32]
Google would lose the MySpace account, Yahoo would flounder and face shareholder lawsuits up the yazoo, and while AOL wouldn't provide the punch that YHOO would, with YHOO reeling MSFT could conceivably swoop in and pick up the pieces. I think a deal will be done, however, with some manipulation of the numbers to allow YHOO to save face while mindful that MSFT stockholders aren't happy with this to begin with, and won't stand for a large premium on top of the one already on the table. I agree YHOO-MSFT is a done deal - they are just haggling over price. If MSFT does drop their bid I don'''t see YHOO'''s stock falling very far.[32] "The structure of the AOL deal is likely to be less appealing to Yahoo shareholders than the straight-forward Microsoft bid," Jefferies Co analyst Youssef Squali said.[7] What if Microsoft dropped its bid for Yahoo and bought AOL and MySpace instead? One analyst says that may be a better deal than a target that doesn't want to merge.[26]
The possible deal between Yahoo and AOL is a bid to thwart Microsoft's bid for Yahoo.[14]
Of the litany of other possible mergers and partnerships creating buzz in the industry, Wiener believes an AOL and Yahoo alliance makes the most sense. A News Corp. pact with Microsoft, though, "doesn't bring anything to the table for marketers," he said. Of course, there is the possibility that none of these deals happen, he added.[15] In the wake of Yahoo's move came a truckload of wild speculation, including the notion that Microsoft could go so far as to elicit the help of News Corp. to mount a joint takeover of Yahoo. This morning, AOL -- now considered Yahoo's prospective alternate merger partner -- went so far as to fuel the speculation engine even further, with its CEO bringing the subject up in a publicly-leaked memo by way of saying he couldn't talk about it further. and just before talking about it further.[47] AOL, News Corp. and Microsoft declined to comment, and Yahoo could not be reached for comment. Yahoo's board is scheduled to meet today to assess its alternatives to a Microsoft takeover, the Journal reported Friday.[11]
SEATTLE/NEW YORK (Reuters) - Microsoft Corp wants to stick with its original takeover offer for Yahoo Inc, but is not ruling out News Corp joining its bid or other options, a source close to the company said on Friday.[13] A joint Microsoft-News Corp bid could create a more formidable competitor to Google by uniting three of the biggest Web site publishers: Yahoo, Microsofts MSN and News Corps MySpace social network.[7] Although MySpace is clearly a high-growth asset, the Web still doesn't merit a separate entry in News Corp.' s financial statements; MySpace and its other online properties are listed in the statements' "other" category. Murdoch has broached folding MySpace into Yahoo for some time - and did so again recently - but moving his efforts from Yahoo to its suitor Microsoft is a new and bold wrinkle.[9]
Wow. That's a lot of news in a small chunk of time, and from some pretty enormous players. It's enough to make you scratch your head as you try to figure out how to make some money from the developments. Shares of Yahoo! have gone from $19 just before Microsoft made its offer to $28 today.[29] Chervitz said Yahoo's maneuvers give that company more leverage to extract a higher price. That view was echoed by at least a half-dozen financial analysts who have been following Microsoft's offer to buy Yahoo for $31 a share in cash and stock.[45] The source close to Microsoft said the company's preference all along has been to retain the original deal structure that would involve paying $31 per share in cash and stock to acquire Yahoo.[13]
Shares of Yahoo rose 12 cents to $27.82, Microsoft was up 15 cents to $28.90, and Google shares fell 0.5 percent to $465.00, all on Nasdaq.[48] Google held a 59.2 percent share of the U.S. Web search market in February, compared with Yahoo's 21.6 percent and Microsoft's 9.6 percent, according to research firm comScore.[23] What I claim is that. Google is not at risk of regulatory anti-trust restriction even if it were to attain 100% market share in paid search, even if an acquisition of Yahoo gave them the balance of the 100% (it wouldn't but it would approximate 80% or more and Microsoft would be left with the largest remaining share at 5% approximate). -- This is an open invitation to all readers.[39] Well, Irk. it would not surprise me. Google takes back a percentage ownership in the combo (maybe even the controlling stake). shuts down their paid search technology and does all of their search for a fee. deprives Yahoo's eyeballs from MSFT. gets an entry into Alibaba and China, and Japan (I think), for a search presence they don't have now. gets access to Yahoo's engineers and platforms for distribution of their myriad apps. builds an instantaneous portal presence and powers up its email share. gets access to Yahoo's banner ad platform. and clears the groundwork for going right after MSFT's throat with Internet-based op systems and legacy desktop. You're an irksome fellow, Irk.[39] Yahoo and Google have partnered for Internet search software before. In 2000, Yahoo chose Google as its default search engine. That lasted until 2004, when Yahoo switched to technology based on the acquisitions of Inktomi Corp. and Overture Services Inc. Lindsay says outsourcing search ads to Google, a move he's recommended since September, could boost Yahoo's stock to as much as $45.[22] The investment also would let Yahoo buy back billions of dollars in stock, the person said. Yang, 39, also forged an agreement this week to run some of Google's advertisements alongside Yahoo's Internet search results.[25]
Feb. 1, 2008: In the shot heard 'round the Internet, Microsoft makes a formal purchase offer of US$44.6 billion based on Yahoo's stock price of $19.18; Yahoo's stock price starts rising.[12] Feb. 11: Yahoo rejects Microsoft's offer as too low; Yahoo stock price closes at $29.87.[12]
"We believe that a clean acquisition of Yahoo by Microsoft is still the most likely scenario." UBS analyst Heather Bellini agreed that Yahoo management would have a difficult time convincing its shareholders that its alternative deal was worth more than Microsofts offer.[7] Ali was surprised that Microsoft had let the proposed deal drag on for so long. "If they upped their offer, this would all be over," he said. AS the internet's biggest players circle Yahoo, each appears to be exploring its options.[2] Yahoo's goal is to convince investors by April 26 that it is more profitable as a stand-alone company. That's the date Microsoft set on Saturday as the deadline to accept its offer or face a takeover battle. "I look at all this as very interesting, very entertaining, but, in the end, kind of a sideshow," said Darren Chervitz, director of research for the Jacob Internet Fund, which holds a large position in Yahoo.[45]
In an effort to avoid a hostile takeover from Microsoft, Yahoo has reportedly begun talks with AOL, but some executives dislike the idea. "We have enough problems without getting theirs, which are much worse," said one. Technology business writer Kara Swisher wrote in her blog that she talked with a handful of high-profile sources at Yahoo, all speaking with anonymity. "It is a very dangerous game of chicken, and Yahoo has never really been good at that," said one executive.[41] Nine days ago, Microsoft CEO Steve Ballmer threatened to launch a hostile takeover and perhaps lower the bid if Yahoo doesn't come quietly by April 26. That launched a frantic round of dealing last week, chronicled breathlessly through anonymous leaks to major newspapers and popular tech and financial blogs. "This is pure desperation," said Parakh, adding that the merger-and-acquisition talk could lead to "inflated valuations" for the online properties involved.[6] Yahoo Juggles Its Options With Microsoft By: David Utter 2008-04-11 The board of directors faces a ticking clock at Yahoo, as a week has passed since Microsoft CEO Steve Ballmer promised Yahoo they needed to make a decision on Microsoft's takeover bid in 3 weeks.[18] Yahoo's board of directors met Friday as the eyes of Wall Street and Silicon Valley considered the implications of a welter of potential outcomes of Microsoft's unsolicited takeover bid.[19]
WASHINGTON (Reuters) - Yahoo Inc's (YHOO.O: Quote, Profile, Research ) attempt to form an alliance with Google Inc (GOOG.O: Quote, Profile, Research ) to stave off Microsoft Corp could run into more trouble with antitrust regulators than Microsoft's unwelcome takeover bid.[23]
Bruce McDonald, an antitrust partner at JonesDay, said combining Google and Yahoo in any significant way "would raise a lot of red flags. My gut reaction is that this is going to get a pretty intensive investigation," said McDonald, an ex-deputy assistant attorney general at the U.S. Justice Department. Yahoo faces a three-week deadline issued by Microsoft Chief Executive Steve Ballmer in a letter to Yahoo on Saturday for Yahoo to agree to its offer or risk seeing the bid lowered and Microsoft starting a proxy battle to take over the board.[17] The Wall Street Journal reported Friday that Yahoo's board was meeting to discuss the company's options, which to many seem limited to one: accepting Microsoft's current offer. In between the rumors and speculation, Yahoo has been making some of its own moves to avoid being subsumed by Microsoft.[12] "If we have not concluded an agreement within the next three weeks, we will take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors," Ballmer wrote. Then he threatened to reduce Microsoft's offer if Yahoo failed to meet the deadline: "That action will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal."[2] The clock is ticking for Jerry Yang, Yahoo co-founder, chief executive and board member. To maintain Yahoo's independence, he has been pushing for growth in Yahoo's business units. The company is scheduled to announce its first quarter results in 11 days. Microsoft Chief Executive Steve Ballmer has vowed that unless Yahoo gives in, he will take his takeover proposal direct to shareholders through a proxy war.[19] Yang's alternatives may look less appealing to shareholders than a Microsoft takeover. Investors would get cash and stock up front in exchange for their stakes in Yahoo, whose revenue growth has slid.[25]
SAN FRANCISCO ''' Brushing aside the threat of a disruptive takeover battle that could batter its shaky stock, Internet pioneer Yahoo Inc. reiterated its refusal to sell to Microsoft Corp. for less than $45 billion.[42] Microsoft's initial $31-per-share takeover proposal, made public Feb. 1, sent Yahoo in search of an alternative deal. It appeared that no one was biting, but Yahoo continued to stave off Microsoft's proposal.[6]
None reported, to my knowledge. As you know, Microsoft did this and they've still got an approximate 90-plus% monopoly in op/desktop. Why aren't they being broken up by regulators even now, if you're fearful that Google might be restricted from a deal with Yahoo? The reason they haven't been broken up is because the benefit to society of allowing their monopoly, from standardization and the efficiency of their products, outweighs their monopolistic threat. Is Google making contractual demands to either consumers or their advertising vendors under threats of taking coercive actions? in other avenues of their business dealings with them or any related third parties?[39] The Verizon deal is viewed as a coup for AOL's Platform-A advertising unit, as deal makers at Microsoft, Yahoo and AOL jostle to take a bigger stake in the business of selling display advertisements.[28]
'There's too much redundancy between Yahoo and AOL. The deal is a defensive tactic against Microsoft,' said Marissa Gluck, founder of technology consulting firm Radar Research. As such, some investors support the move.[3]
Separately, a source familiar with the matter said News Corp continues to talk directly with Yahoo on reaching a deal without Microsoft.[13] Microsoft immediately attacks that notion as anticompetitive and says it would never pass regulatory approval. April 10: News Corp. is said to be in talks with Microsoft to join forces to buy Yahoo, seen by many as a way that Microsoft can raise its offer without spending any more money.[12] Reuters says that News Corp is having talks with Yahoo independent of Microsoft and the Wall Street Journal, which is now owned by News Corp, said that Microsoft was going it alone.[16] If successful it would create a new internet giant. Executives close to the talks described them as "fluid" but pointed out that News Corp had held on-off talks with Yahoo as well as Microsoft.[2] No matter what happens when the dust settles and rumors become reality -- or not -- one thing is quite likely: combining the infrastructure for the Internet businesses of Yahoo and Microsoft, or Yahoo and AOL, or Yahoo and Microsoft and News Corp., is going to be a logistical headache.[12] Microsoft isn't taking the news lying down, however. It is approaching News Corp, owned by Rupert Murdoch, with the idea of partnering to complete their hostile takeover of Yahoo. News Corp has bowed out of the race for Yahoo once before, so it isn't clear how likely they would be to sign on with Microsoft in its attempt at buying the internet presence it hasn't been able to build on its own.[10] NEW YORK -- Yahoo Inc. and Microsoft Corp. captured the tech sector's attention yet again this week, as the ailing Internet icon continued efforts to avoid a takeover by the world's largest software maker.[33]
Yahoo CEO Jerry Yang apparently will do anything to avoid being taken over by Microsoft. How else to explain his proposal last week to acquire AOL'the has-been of the Internet space, which has been dying a slow death since Time Warner acquired it in 2000 at the peak of the dotcom bubble.[3] As an alternative, Yahoo is considering a three-way partnership with Google and Time Warner's AOL that would keep the Sunnyvale, Calif., Web portal independent.[36] AOL Yahoogle? MySoftNewsCorp? With this crowd, anything's possible Yahoo's Yang enlists everyone from Time Warner's Bewkes to the Google guys in his anti-Microsoft defense.[3]
The AOL deal would reportedly see Time Warner make a cash investment in a combined entity in return for about 20% of the place. AOL, without its dwindling dial-up business, would be valued at about $10 billion and Google, of course, owns 5% of AOL.[16] A deal would value AOL at $10 billion, with Time Warner kicking in some cash in exchange for 20 percent of the combined unit.[7]
NEW YORK (Reuters) - Time Warner Inc's AOL landed one of its biggest advertising deals since the division's restructuring as the sole representative of telephone company Verizon Communications Inc's online advertising inventory.[28] Sanford C. Bernstein's Charles Di Bona surmised in a research note that a Yahoo-AOL deal could give investors more money than the Microsoft deal if AOL's parent company, Time Warner, were to contribute some cash to it.[12]
The rivals have joined up for a two-week advertising trial. AOL The company recently bought Bebo.com but is not loved by its parent Time Warner, which would fold AOL into Yahoo in return for a stake.[2] The plan that was first reported in the Wall Street Journal (owned by Murdoch, incidentally) would have Time Warner put AOL into Yahoo at a relatively modest valuation and also some cash to fund a buyback of Yahoo shares.[9] The source confirmed a Wall Street Journal story saying Yahoo would receive a cash investment from Time Warner in exchange for a 20 percent stake in the combined Yahoo-AOL business.[38]
Two sources familiar with the matter said Thursday that Yahoo is negotiating with Time Warner to acquire AOL in exchange for a significant chunk of Yahoo.[45] Yahoo also is still in talks with Time Warner Incs AOL about a potential tie-up, the person said.[48] A source familiar with the situation was unwilling to confirm to Reuters the Journal's characterization of Time Warner's thinking, but said that talks continue between Time Warner and Yahoo.[13]
House Judiciary Committee Chairman John Conyers, D-Mich., said Thursday that that potential underscores the need for a hearing about competition on the Internet and online advertising. Chris Murray, senior counsel for Consumers Union, said his discussions with both Microsoft and Google will help him decide what position to take on a merger or its parts. Although both sides seek his support or to limit his criticism, the talks also save a lot of time in terms of getting basic information about a proposed deal. [36] Left unsaid is that Google's position as the leader in online advertising could also face a serious challenge, particularly in what's known as display advertising, which is the equivalent of online billboards. Chester said he has spoken with Microsoft's lobbyists by phone and in person a number of times, as they try to win his support for the merger or, at least, defuse any opposition. They explained, as they have publicly, that combining forces would create a more serious competitor to Google's juggernaut. Google's pitch, Chester said, came at an event about privacy it hosted two weeks ago at its Washington office, after a filet mignon dinner with a few dozen other invitees. A Google political strategist pulled him aside and asked that he help to scuttle the deal, he said.[36]
The first big surprise was news that Yahoo is trying out search advertisements from Google, Yahoo's largest rival and, for that matter, Microsoft's, too--at least when it comes to online aspirations. [46] Brad Smith, Microsoft's general counsel, issued a statement saying: "Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo."[2] While Google dominates search advertising, Microsoft and Yahoo dominate in e-mail.[27]
Any Yahoo partnership with Google for search advertising beyond a current two-week test and an alliance with AOL would also likely be reviewed.[36] April 12 (Bloomberg) -- Yahoo! Inc., after agreeing to test Internet search advertising technology from chief rival Google Inc., insists the trial run is just that.[22] Yahoo announced on Wednesday a test to outsource Web search advertising to Google.[7]
The two-week test with Web search leader Google would involve Yahoo targeting Google Web search advertisements at 3 percent of the users of Yahoos own search services.[17] "The Justice Department would certainly want to take a serious look at that because it would mean that a firm that would want to take advertisements or to place advertisements (online) would have only one place to go," said Aaron Edlin, who teaches law and economics at the University of California at Berkeley. In recent years, Web search services have taken over from once popular portals or home pages, such as AOL, MSN or Yahoo's own home page, as the primary starting point for many consumers seeking information on the Internet.[23] SCOTT FULTON: Well, let's face it, isn't it the fact that Yahoo isn't the market leader it used to be, with maybe an exception that it has an eyeballs lead in terms of portals, due to the evolution of the Internet in general? We're not talking about a landscape where you can really have one dominant player; let's face it, there are 18 or 19 dominant players. CARMI LEVY: Right, but I think this is a case where Yahoo's leadership failed to properly lead how the market and how the Internet was transforming itself, and while they were focused on being the dominant Web presence on the Internet, that over time became less and less relevant as monetized search became the engine of growth that Google capitalized on. Yahoo has the traffic and Yahoo has the eyeballs, but they increasingly lagged Google in terms of converting all that traffic into bottom-line profits.[47] IN 2001 Rafat Ali, publisher of the new media website Paid Content, used four search engines to find something on the web. "I was using Yahoo, AltaVista, Ask Jeeves and Excite and was frustrated with all of them," he said. Then he switched to Google - and hasn't looked back.[2] Yandex led all search properties with 47. 4 percent of all searches conducted in Russia, followed by Google sites (31.2%), Rambler Media (9.7%), Mail.Ru Sites (7%), and Yahoo Sites (1.3%). "The Russian Internet market has been experiencing rapid development, with its audience growing 25 percent during the past year," said Linda Boland Abraham, comScore Executive Vice President. "Several Russian Internet brands are leading the way, so it's clear that there are strong opportunities for Internet-based businesses as this market continues to expand."[49]
As media coverage of Microsoft'''s recent bid to acquire Yahoo piles up and debate among industry pundits over what each company stands to gain or lose should Microsoft succeed reaches a near-deafening pitch, little-to-no thought or attention is being given to how the merging of the 2nd (Yahoo) and 3rd (Microsoft/Live Search) largest search engines will impact the average consumer, according to Edward Mandel, founder and chief executive officer of NeXplore Corporation (OTC: NXPC). Said Mandel: '''Right now, search is dominated by a handful of players locked in a war of attrition, but their back-end battle for computational brawn and algorithmic complexity has done little to advance search over the past few years. They are so myopically focused on what the other is doing that they'''ve lost sight of making the search experience easier, more enjoyable and more productive for the average consumer.[26] Yahoo's directors met yesterday to consider the bid, a person familiar with the talks said. Yahoo spent more than $2 billion on acquisitions to build its own search engine, and released a program last year called Project Panama to make search ads more relevant and more likely to be clicked by users.[22]
Yahoo directors met Friday to consider Microsoft's bid, a person familiar with the talks said. Yahoo spokeswoman Tracy Schmaler declined to comment, saying the company doesn't confirm when its board meets.[36]
Soon, said Collins Stewart internet analyst Sandeep Aggarwal, "there will be three - Google, Baidu and some combination of Microsoft and Yahoo". Yahoo's board members are weighing up their options after meeting on Friday. Whatever they decide, by the end of the month the internet landscape looks bound to undergo a decisive change.[2] CARMI LEVY: Exactly, because the transition away from the PC-based paradigm of computing toward the Internet-based paradigm is well under way, and so there is widespread recognition that Microsoft represents the vision of yesterday, while Google represents the vision of today and tomorrow. While Microsoft today still has multiple revenue streams on which it can rely, it's also faced with the cold, cruel reality that its legacy streams of revenue are going to slowly dry up over the next few years, and either it gets its Internet strategy/act together, or it too will find itself in straits similar to what Yahoo finds itself in today -- namely on the receiving end of a bidding war.[47]
If Microsoft, the government, or another party can show that the Google-Yahoo deal represents an agreement between the companies in which Google is effectively paying Yahoo to shut down a competitive service, the deal would be declared illegal under anti-trust law.[40] Under the deal, which was announced last week, Yahoo! will initiate a limited test of Google's AdSense for Search service.[5] Then on Wednesday, Yahoo executed what can only be called a masterstroke, announcing a simple beta test involving Google's AdSense for Search, and explicitly telling analysts not to make anything of it, especially since Yahoo has every right to explore "strategic alternatives." Suddenly, it seemed Yahoo had a world of options available to it that weren't available the week before, including a very real chance of its brand and its executive suite surviving mostly intact.[47]
SCOTT FULTON, BetaNews: Wednesday's move, you've got to admit, was a masterstroke on Yahoo's part: Google didn't even have to do anything. It was perfectly timed, and a great idea: Open up a little beta test for a couple of weeks, we'll throw some Google ads onto our site. CARMI LEVY: They say it's a technical or marketing effort; it has nothing to do with structural rearrangement of the company itself. SCOTT FULTON: Pay no attention to all these people behind the curtain.[47]
From California to Utah to New York, state legislators regularly propose laws with major implications for the online ad industry. A once-loose collective of companies including Google, Yahoo, AOL and eBay finally incorporated officially this year after four years of collaborating to influence state policy.[44] The Company Continues to Offer Yahoo! Search Results Through Consumer Applications NEW YORK, April 14 /PRNewswire-FirstCall/ -- Enliven Marketing Technologies Corporation today announced that Yahoo! has extended its agreement with Enliven to provide search results through the company's graphically enhanced search applications for an additional two years, from March 17, 2008 to March 17, 2010.[50] In a week marked by a dizzying barrage of news on the future of Yahoo and its suitors, industry watchers were left mostly scratching their heads. and waiting for more scraps of information to chew on. On the heels of Microsoft threatening Yahoo with three weeks to accept its acquisition offer --or else face a proxy fight and lower price--some radical scenarios swept across the so-called Microhoo landscape this week.[46] Yahoo is weighing its options to accept a buyout by Microsoft or consider tie-ups with other companies, in particular a reported plan to join forces with AOL, as a way to stave off the software giant's advances. The possibilities for the ending to the story that begin on Feb. 1, when Microsoft made its US$44.6 billion offer for Yahoo, have become dizzying, with rumors cropping up almost daily in the past week about what the ultimate outcome might be.[12] At this time last week, Yahoo was said to have reached the end of its rope. It didn't appear very viable on its own, and certainly no one would be crazy enough to try to top Microsoft's cash offer. Seven days later, and it's a different world.[47] A source familiar with the boards activities told Reuters that Yahoo directors meet to discuss the Microsoft offer and alternatives to it as many as three times a week.[7]
It is more than two months since Microsoft sprang its takeover offer on Yahoo, and relations have soured by the week.[2] Yahoo has rejected Microsofts unsolicited offer to buy it as insufficient and has been seeking alternatives to a Microsoft takeover.[43]
Tellingly, Yahoo's shares have stayed stubbornly below Microsoft's $31 offer.[2] Some took on the question of whether Microsoft's $31 per share price undervalues Yahoo. Others wondered if Yahoo's Jerry Yang can dance with the heavyweight champ from Redmond.[46] Uneasy investors sent Yahoo's shares down $.31, or 1.1 percent, to $28.28, while Microsoft's shares slid $.52, or 1.8 percent, to $28.59.[19] Yahoo shares rose nearly 3 percent on Thursday to close at $28.59, while Microsoft rose 0.8 percent to $29.11.[7]
Gamco managed about $31 billion in assets as of Dec. 31, including shares of Microsoft and Yahoo.[25]
To counter that dominance, Microsoft offered in January to buy Yahoo in a cash-and-stock deal now valued at $42 billion.[23] CARMI LEVY, Senior Vice President for Strategic Consulting, AR Communications: Clearly what precipitated this uptick in activity between Microsoft and Yahoo is the fact that their combined position in the market has continued to weaken since Microsoft first announced its bid. With Yahoo expected to report later this month much weaker results, that's only going to put Yahoo on an even slipperier slope. The clock is certainly ticking for Microsoft to consummate a deal; and at some point, it doesn't matter what form it takes, it needs to close this off and move on. Otherwise that window of salvation for Yahoo is ultimately going to close.[47]
"A Yahoo-AOL merger does not provide Yahoo shareholders value equivalent to the existing Microsoft bid.''[25] Microsoft did not provide a spokesman for an interview. In a letter to members of Congress just after its bid for Yahoo, it cast the merger as "pro-competitive" and a boon to online advertisers and publishers.[36]
Under one plan, News Corp could combine MySpace with Microsoft's MSN and make a joint bid for Yahoo.[2] Alright, AOL is not excrement and Microsoft is not a wild animal, but the analogy is apt. With News Corp.' s Rupert Murdoch vowing he wouldn't get into a bidding war with Steve Ballmer, and even indicating he may join forces with Microsoft in its pursuit of Yahoo, Mr. Yang has few options. Doing a bad deal'or at least threatening to do one'may be his best defense.[3] News Corp would bring a level of online experience that Microsoft lacks, helping to even out any bumps in the road in running Yahoo's much loved services like Flickr and Yahoo Groups.[10]
Get it? The industry at the upper echelons that include Microsoft, Google, Yahoo, NWS, AOL/TW and maybe a double handful of others will over time organize itself into an oligopoly that competes with uniform standards, similar to the automobile industry. The quasi-monopolistic tendencies of the oligopoly participants will be offset by the efficiencies and reduction in overall costs of providing their services to the public.[39] Google could not be reached for comment. While Yahoo shareholders want to get as much money as they can from a Microsoft acquisition, that choice might not be in the best interests of the company in the long term, Gardner said.[11] Even when a congressman says (prphrz) '''We'''ll pay close attention to any potential long-term deal between Google and Yahoo,''' it doesn'''t mean much. He'''d have to make the same case I'''ve challenged you with and prove it, and he can'''t. Ma Bell wasn'''t broken up until a little company, MCI, complained because AT&T; was attempting to restrict their access to markets using a new and innovative way to do business and serve the public.[39] " I did not mean in that statement that MSFT had attempted to restrict any other company's search algorithms, but rather that they have employed predatory tactics in the past to penalize their partners for conducting business with Microsoft's competitors. That's what gets the regulators interested, Walter. It's when a company uses predatory practices to suppress their competition when in fact the regulators deem that competition to be in the best interests of the public. http://en.wikipedia.org/wiki/Criticism_of_Microsoft#Government_anti-trust_suits http://www.businessweek.com/1997/48/b3555115.htm But anyway, MSFT's case is old news and I'm not attempting to beat a dead horse. My focus is on Google and my claims that they are not so much at threat for anti-trust actions because of the market share they have in paid search.[39] Yahoo The company needs one or more of the above. It was once the dominant search engine, but its share has dwindled. It wants to increase its ad revenues and get a piece of the popular social networking business.[2] Yahoo has recorded eight straight quarters of declining profit as Google took market share and advertising dollars in the online search engine market.[25] By now I think clear that search is a natural monopoly. Panama worth less and less as query share drops, and ultimately Yahoo can probably make more taking a cut of higher Google click prices than getting 100% of its own (and paying dev costs). Henry, we're splitting hairs but a receptive (neutralizing) statement leaked to the press would dramatically improve the spirit of cooperation of their subsequent meeting next week, and not lessen their ability to negotiate one iota.[39] Now, Yahoo is acknowledging that Google still does it better, said Canaccord Adams analyst Colin Gillis. "What does this actually prove except to show how much Panama is lagging?'' said New York-based Gillis, who recommends buying Google and Yahoo shares and doesn't own them. "They're going to have some nice hard data into how much they're behind.''[22]
Lindsay predicts Yahoo shares will perform in line with the rest of the market. He doesn't own stock in Microsoft or Yahoo.[25] Yahoo would have to persuade shareholders the arrangement would not be blocked by regulators and that it would create more long-term value than an immediate sale to Microsoft. This could be a hard sell, as a significant portion of Yahoo's shares are held by arbitrage firms who are counting on a quick profit.[27] Everyone is talking about how important are the shareholders and the market. nobody in talking about millions of users leaving Yahoo's sites (mail, search, ads. ) if Microsoft will take hold of Yahoo.[47] If Yahoo really digs in here, and Microsoft's only choice is to try to get Yahoo's board fired at the shareholder meeting, it is still conceivable that Microsoft will give up and go home.[32] Yahoo plans to present shareholders with a three-fold plan to move forward without Microsoft.[14]
The move is seen as an attempt by Yahoo! to stave off Microsoft's takeover bid and received immediate criticism from the software and internet giant.[51] Investors barely reacted to what was seen as Yahoos latest effort to force Microsoft to raise its $42 billion bid.[17] Last Friday. I'm waiting in a lobby and I'm overhearing the TV next door, and they're watching CNBC. And these analysts are saying Yahoo has no choice now; they basically have to face the music, come down off their soapbox, accept the Microsoft bid, take it for what it's worth. and move on to be part of history. They failed, at this point.[47]
There was of course a swift and bitter lesson learned there, and no reason to recount it here for the umpteenth time. Lately, the game has shifted to digital players spending money mainly to buy more of their own ilk - which is exactly what Microsoft is trying to do with Yahoo.[9] Even though there was no mention of anything new or creative to be the product of the merger, doesn't mean that there won't be. Really what is stopping them from Bundling Xbox 360s with yahoo messenger or myspace, or having other Microsoft products with these features. I believe this could turn out to be a wonderful merger if something new and innovative is done.[26] My guess is that it would be another merger whose potential remains a mirage. Microsoft would likely attempt to rejigger Yahoo's corporate culture and whoever at Yahoo who is still bright and creative (if they haven't already gone to Google) would jump ship and do whatever they had to avoid the Redmond-ization of what they had known and loved. Let's call this soap opera "As the Worm Turns".[26] Peter Guryan, an antitrust lawyer with Fried Frank, said a Yahoo merger with either AOL or Microsoft would be a source of intense interest for regulators.[3] Yahoo is on the verge of a merger deal with AOL and will likely escape a threatened hostile takeover.[4] According to Swisher, the only person who wants a potential deal with AOL is the company's CEO Jerry Yang. This week it was reported that AOL and Yahoo could potentially create some kind of partnership.[41] The company yesterday inked a deal to acquire Web analytics software developer Tensa for an undisclosed sum. The agreement gives Yahoo most of the company's assets including its IndexTools business and R&D; division. The portal plans to leverage the technology to support online marketing campaigns across its various networks, including an initial trial with 150,000 smaller businesses.[4] If, on the other hand, Yahoo can demonstrate that the deal is merely a buy-vs-build decision in which Yahoo is unilaterally choosing to implement Google's AdSense service, then outsourcing would NOT be illegal. Our source says that an "agreement" in this case does not need to be an explicit contract: It merely needs to be a "meeting of the minds" in which the two largest players agree to do business with each other in order to enhance their businesses.[40] You can't prove that. If Yahoo's test with them were to show a dramatic improvement in the net revenue that Yahoo could derive from outsourcing search to Google, and were Yahoo to elect to contract with them for the service, then what you're suggesting would possibly deprive Yahoo of an opportunity they are just as entitled to as any other business that elects to sub-set Google search on their site.[39]
The experiment will allow Google to place ads tied to about 3 percent of the queries made in the United States through Yahoo's search engine ''' the Internet's second largest after Google's.[42] Its initial in-principle opposition to the software giant has softened to the point where Yahoo! is justifying its rejection solely on the grounds of price. Google is using his newly created firm Qatalyst to advise it on the Yahoo! situation, although the number one search engine faces regulatory barriers if it tries to get directly involved in the bid battle.[31] Google The world's No1 search engine and market leader in search advertising is attracted by Yahoo's audience - it has 137m American visitors a month.[2] Yahoo's defiance marked the latest in a tug-of-war pitting two high-tech icons trying to mount a more formidable challenge to online search and advertising leader Google Inc.[42]
Commenting on the potential deal, Aaron Edlin, a law and economics teacher the University of California in Berkeley, stated that it would draw considerable scrutiny from U.S. and European regulators, Reuters reports. He said: "The justice department would certainly want to take a serious look at that because it would mean that a firm that would want to take advertisements or to place advertisements would have only one place to go." Senator Herb Kohl, a Wisconsin Democrat and chair of a Senate antitrust panel, added: "Should there be moves to make this agreement permanent, we will examine it closely in the antitrust subcommittee to ensure that it does not harm competition." Mr Kohl went on to express reservations about the consolidation of organisations in the internet advertising market - such as Yahoo! and Google - which used to be independent from one another.[51] MSFT would have assembled a relatively substantial Internet presence with significant traffic at what would likely be a much lower cost that the YHOO deal. This would give MSFT a better platform with which to compete with YHOO and try to beat rather than buy them. It also has the added advantage of including a poke at GOOG to the extent the AOL outsourcing deal includes change of control provisions that would allow MSFT to capture that search volume. I'm not entirely sure what Microsoft adds to this deal however.[26]
According to Microsoft, the deal would consolidate more than 90 per cent of search advertising in Google's hands.[51] A News Corp deal with Microsoft could be further complicated by the fact that Google has a $900m exclusive ad deal with MySpace that runs until 2010.[2] The thinking now is that the real riches are in consolidating the digital space, where technology, reach, community, utility and cost-efficiency for advertisers seem to trump conventional notions of programming. (Google = Exhibit A). Although the basic motivation of News Corp. and Time Warner - not to be marginalized - are similar, they have very different approaches and ambitions. At News Corp., Chairman Rupert Murdoch hit paydirt in buying MySpace three years ago for under $600 million, but he's been looking for ways to translate its huge Internet audience into major advertising dollars.[9] Time Warner needs an Internet play, but 20 percent of a combined Yahoo-AOL may be better than 100 percent of a still struggling AOL competing against Google and Microsoft-Yahoo.[26]
Yahoo's Yang enlists everyone from Time Warner's Bewkes to the Google guys in his anti-Microsoft defense.[3] At least two decisions were made at Yahoo's board meeting yesterday, say the NYT's Andrew Ross Sorkin and Miguel Helft: Yahoo (YHOO) will meet with both Microsft (MSFT) and Time Warner (TWX) next week.[39] The board agreed to additional meetings, probably next week, with Microsoft and Time Warner, the New York Times reported, citing people briefed on the board's discussion.[22]
Frankly, the best deal of the bunch, would be for News Corporation to buy AOL from Time Warner. That merges a portal, instant messaging system and social network together.[26] By contrast, Time Warner's ambition to combine AOL into Yahoo seems more of a calculated retreat.[9]
Mr. Haverty said, however, that people fail to appreciate the value of AOL. The company's purchase last month of Bebo, an international social networking site, will give it access to some 40 million users worldwide. Another 40 million or so people still use AOL's instant messaging service. While details of the Yahoo proposal are sketchy, Mr. Haverty said he's comfortable with the $10 billion valuation it reportedly put on AOL. 'We think Yahoo gets it for less than full price,' he said.[3] Since YHOO was trading at $19 before MSFT came calling, a post MSFT walk-away price of $20 for Yahoo seems awfully optimistic. Here's a scenario that's been floated by others: MSFT to buy AOL, and acquire MySpace from NewsCorp, and leave Yahoo! dangling in the wind (with a full court press on keeping them away from GOOG).[32] I've just noted something strangely coincidental to my remarks. I'm about to post these remarks under a captcha code that reads: "maims" -- BTW - Mr. Webmaster, big improvement in the captcha, thanks. There is one element of this deal that I haven't seen discussed, although I may just have overlooked it. It's that it is entirely possible for whatever deal MSFT were to close this for (at least to the "in principle price" of a definitive agreement) that the deal may be worth considerably more to Yahoo sellers by the time of the closing of such a deal. Let's not forget that MSFT still stands a reasonably good chance, in my personal opinion, of surprising favorably again at their next quarterly report.[32]
The best option is to accept the Microsoft deal," said fund manager Mike Binger at Thrivent Financial in Minneapolis, which owns small stakes in Yahoo and Microsoft.[7] Microsoft will want to block a Yahoo-Google partnership. We believe the deal will have these benefits for Yahoo whether or not it is illegal--because even a swift injunction would take several months (more likely, several years), at which point the Microsoft-Yahoo negotiations will be ancient history.[40] SAN JOSE, Calif. -- A flurry of developments in Yahoo's struggle to stay independent failed to impress investors, who continued to place their bets on the deal proposed by Microsoft in February.[45]
"A long-term deal could be the only option that allows Yahoo to remain an independent company," a source close to Google said.[17] Antitrust lawyer Evan Stewart, of Zuckerman Spaeder LLP, said a tie-up between Google and Yahoo would raise eyebrows, even if the deal was not a formal merger. He called the U.S. Justice Department an 800-pound gorilla with the power to investigate any deal it found troubling.[7] Even if a Google deal happened, it would do nothing to stem the decline in numbers of Web searchers using Yahoo.[17]
Yahoo's shares barely budged after news of the Yahoo-Google deal was reported.[27] As of December 31, Thrivent owned about 1.5 million Yahoo shares, or 0.11 percent, and about 6.3 million Microsoft shares, or 0.07 percent, according to regulatory filings.[7] Yahoos share of the U.S. Web search market has dropped more or less steadily to 21.6 percent in February from 26.9 percent in January 2007.[17]
Yahoo would use the cash and other funds to buy back several-billion dollars in stock at a price near the middle of a range between $30 to $40 a share, a source familiar with the plans said on Thursday.[7]
Software companies, for example, might not want to advertise with Yahoo, if it means the money goes to Microsoft. "If the Yahoo-Microsoft thing happened, there's the phase of people talking about its promise, but the reality is, people hunker down, and there doesn't appear to be a hard-core defined strategy of what it means to our community," said Rob Kabus, executive vice president of strategy at Aegis, a communications holding company. "In the absence of that," Kabus said, "people get to be "show me the numbers" about their advertising buys rather than open to bigger strategic alliances."[24] Yahoo's management is attracted to the AOL alternative as a way to keep the company out of Microsoft's hands.[26] Rumors that Yahoo and AOL might merge have been swirling since 2006, and one financial analyst on Friday even said it might be the only way Yahoo can avoid Microsoft's buyout.[12] MSN's Internet-based operations were not the core of Microsoft, and Microsoft still had revenue streams from desktop operating systems, productivity software, server software, development environments. Microsoft still had a whole other viable business that was able to fund its continued growth through the decades, whereas Yahoo was not so well-diversified. SCOTT FULTON: So as some financial analysts paint this picture, Microsoft can still acquire Yahoo, continue to fail in this respect, and be buoyed by the fact that it still makes Windows and Office.[47] I just can't stand the idea of MS owning everything." Another reader opined, however, that customers don't care about a possible Microsoft acquisition because Yahoo has become irrelevant, because this will likely be the "one-two" punch to take out Microsoft, and the Internet business has become "just that, business."[46] Just days after Microsoft's February 1 bombshell that it was going after Yahoo directly, many financial analysts declared Yahoo to be headed to that great collection of defunct Internet brands in the "cloud" someplace, perhaps alongside Netscape.[47]
'''In my opinion, the average consumer would not be best served by a Microsoft ''' Yahoo merger. The last thing people need today'''and the marketers trying to reach them need'''is less choice and diversity in search, which is probably the only sure thing this mega-merger will deliver.[26] A potential merger of AOL and Yahoo met with muted reaction from shareholders, analysts and insiders.[2] Binger said an AOL-Yahoo merger made no sense. "I just see Yahoo as a mature brand and AOL as a declining brand," he said.[7]
PacificGatePost says: AOL is not Yahoo's salvation by any means, the Google approach is peculiar scrambling. opnbrktLink to related site.clsbrkt Yang should get some new.[14] "Engineers sitting at MSN or at Yahoo or AOL or even at News Corp. are all distracted. They're all wondering. 'Are we going to have a job,' " he said.[6] MySpace clearly adds an important component - social networking - that neither Microsoft's MSN nor Yahoo have much of. What's interesting is that, according to someone close to Murdoch, he is for now insisting on management control of a combined MyMicrohooSpace. How this would fly with Microsoft is iffy and unclear: News Corp. would have to kick in significant cash to get to that level.[9] Debates about valuations helped create an impasse in similar discussions between Yahoo! and News Corp, where Yahoo was not willing to accept that MySpace, the News Corp social network that would have been injected into Yahoo!, was worth as much as $15 billion.[31]
Yang, 39, Eric Hippeau and Arthur Kern have been on the board since before Yahoo's initial public offering in April 1996. "It's quite possible that the first instinct of people who've been there from the outset would be to look to see if keeping the company independent would be viable,'' said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York.[22] Analysts including UBS AG's Heather Bellini in New York suggested that Microsoft might even switch to an all- cash offer or raise the bid.[25] Not to be outdone, Microsoft hit back with news that it was talking about a joint offer or arrangement with News Corporation, the media group that owns The Sunday Times and MySpace, among other titles and companies.[2] Symantec CEO John Thompson kicked things off with a few predictions : that malicious software will outnumber legitimate software, increasing the need for so-called white listing; that identity management will grow "beyond the enterprise" and start to include every customer in the world; and that digital rights management will be become a reality for all content, not just music and video. Microsoft took advantage of the security crowd to release its new Stirling security suite in public beta. The Stirling security package, the next wave of its Forefront software, offers one management console, enabling administrators to push policies out across PCs, servers, and other computers that access the Internet.[46]
April 7: Yahoo again rejects Microsoft's offer on the basis that it is too low.[12]
While Microsoft and Yahoo! engage in their odd mating ritual, they are benefiting the very company that is driving them to seek partners.[34] Google Yahoo MSN More feeds available in our RSS feed index. Xerox spinoff company is using technology from its printer business to make better solar cells and to purify water. View this gallery.[46] Yahoo spokeswomen were unavailable for comment. A Google spokesman declined to comment, saying he was not aware of the story and was not aware if the Wall Street Journal had called his company for comment.[48]
Yahoo!'s recently announced plan to form an alliance with rival search engine provider Google ]] Google concerning Google's AdSense for Search service could run into legal problems, experts have warned.[51] A Yahoo-Google alliance would curb competition, argued Microsoft General Counsel Brad Smith and deliver "over 90 percent of the search advertising market" into the hands of Google.[19] The two most powerful players in the game are Google and Microsoft, and each one is attacking the other's position of strength. Google is using its Internet advertising lucre to chip away at Microsoft's powerful position in business software.[6] In an instant, Google took a business that Microsoft (through Frontbridge, now Exchange Hosted Services) and others have been selling with entry costs in the thousands of dollars and made it available to individuals and companies of all sizes for as little as $25 per year per account. That's pretty dramatic, and the value-investor cash-cow models for Microsoft can change pretty quickly when a competitor can''offer''similar services''for free.[29] Ten years ago, AOL was the online player to beat, Microsoft seemed unstoppable, MySpace didn't exist, and Google was being cobbled together by two guys in a dorm room. Today, AOL seems to be grasping for straws,''while Microsoft, with its MSN division having been unable to build up steam,''seems to be''trying to make just about anything stick''so it can''stay relevant in the online space.[29] Russian language search engine Yandex reached 62 percent of the Russian online audience, making it the leading Web property in February, followed by Mail.Ru sites (51% reach), Rambler Media (49 percent reach), AOL (42 percent reach) and Google Sites (41% reach).[49] AOL has reached a deal with Verizon Communications to be the official provider of advertising for the company's online and mobile Web properties. Under the agreement Verizon will use AOL's Platform A's sales force and its ad-serving, targeting, and inventory management tools to power ads on its online inventory.[30] The deal also extends Verizon's existing partnership with Third Screen Media, Platform-A's mobile ad serving platform. Attempting to make good on the promise, AOL has a created a Taiwan-based web portal that will offer its usual array of services, including a variety of content pages and its e-mail and AIM tools.[52]
Blockbuster Offers up to $1.33B for Circuit City Blockbuster has offered to buy Circuit City Stores for as much as US$1.33 billion in a deal aimed at taking advantage of the. Salesforce Announces Integration With Google Apps Salesforce has integrated Google's online productivity applications with its on-demand CRM (customer relationship management).[12] The deal would exclude AOLs fading dial-up Internet access business and value AOL at about $10 billion.[38]
Internet advertisers can't figure out what the two companies will look like in six months, so search leader Google is set to profit from the confusion. "We find this to be a very advantageous situation for Google," Cantor Fitzgerald analyst Derek Brown said Thursday. "The longer this gets dragged out, the better for Google." He added: "The more complicated a deal gets, the more difficult it becomes to satisfy all parties, and the more complicated the integration gets, the more it favors Google."[34] The Verizon ad deal, whose price was not disclosed, will give Platform A the right to represent all of Verizon's advertising space on the Internet, including premium space, the companies said. "We're all about working with Web sites to serve whatever needs they have," Lynda Clarizio, president of Platform-A. Continued.[28]
Among other members, AOL, Facebook, Google, Monster Worldwide and Yahoo, in addition to trade groups the Network Advertising Initiative and NetChoice signed the letter. [44] The Yahoo plan would also include a multi-billion dollar stock repurchase as well as an advertising tie-up with Google, the report said.[14]
I predict Mickysaurus will eat Yahoosaurus in the end but the result will be a slow moving constipated dino, not an agile beast that can do battle with Google. All the smart engineers will leave (or have already left) Yahoo and can now do something creative, fun and new in startups or other innovative companies in the Silicon Valley instead of wasting their efforts @ Yahoo.[26] My guess is that all the talent at Yahoo will find new jobs the day of the takeover.[41] What was once a straightforward tussle between ailing Yahoo and muscle-bound Microsoft has become a takeover battle swirling with intrigue, rumour and counter-rumour.[2]
Myspace also fails immensely vs Facebook, I would imagine as more people catch on, facebook will become much bigger. Microsoft should increase their bid for yahoo and try to find a way to integrate it with their facebook stake (they should increase that as well).[26] In an attempt to improve the relevance of ads attached to search results, Yahoo plans to adjust the process advertisers use to bid for placement as soon as next week.[37] Last week, Yahoo! ]] Yahoo! ]] Yahoo! revealed it is set to begin a test of AdSense, which would deliver relevant search ads alongside Yahoo!'s own natural search results.[51]
We continue to believe that the Yahoo-Google search test was a smart move that will likely lead to a higher takeout price for Yahoo.[40]
The $31-a-share bid was 62 percent more than Yahoo's closing price Jan. 31.[25] Which is why we're skeptical of the recommendation of some analysts that YHOO is a screaming "event buy" here. The stock is trading only slightly below the value of Microsoft's current bid, and if Microsoft were to suddenly increase its bid to, say, $33, the stock would likely jump 15% or more.[32] The one hand I can't figure out is that of Microsoft. People involved in the deal told my colleague, Andrew Ross Sorkin, that Microsoft sees News Corporation as a way to help increase its bid. It's not that it needs the cash, but that the possibilities of a three-way combination may make enough more money to justify a higher bid.[26] Let's not forget the odd conundrum with a News Corp/MSFT/Yahoo combo given MSFT's stake in Facebook the big rival to News Corp's MySpace. Of course, Microsoft already has content deals with News Corp's Fox Sports so there's at least some precedent in the two working together but this is of course on a whole other level.[26]
"The fact that they're willing to go to their arch-enemy Google is instructive of how they feel about deal," Anderson said. He faulted Microsoft for failing to bring the deal to a close smoothly.[6]
In a presentation last week, "Google vs. Microsoft," Gartner analyst David Mitchell Smith noted that "Microsoft is currently better positioned to succeed in advertising than Google is in enterprise software."[6]
"Microsoft remains the most motivated and best capitalised option for Yahoo," said Stanford Group analyst Clay Moran.[2] "Microsoft remains the most motivated and best capitalized alternative for Yahoo,'' Stanford Group Co. analyst Clay Moran said in a note yesterday.[25]
We know that Microsoft and Yahoo have been in talks before, rather significant ones, long before it was ever disclosed in Ballmer's letter of Feb 1.[39] Yahoo's board members received a letter last weekend from Microsoft's fearsome chief executive, Steve Ballmer.[2] Yahoo's board, seemingly less romantic, may simply want a way to force Microsoft to pay more.[26]
"The threat is decreased relevance," Smith said. "That comes as a result of the Web and more and more things being made available through the Web." Even if Microsoft is successful in acquiring Yahoo a process that faces many months of regulatory hurdles and integration challenges after an agreement is reached "it's certainly not a given that they're going to become tremendously successful overnight," Smith said. He added, "Together, they've got a better shot than they do individually."[6]
Sen. Herb Kohl, D-Wis., chairman of a Senate subcommittee on antitrust, said Congress is paying close attention to Yahoo's test with Google. "Should there be moves to make this agreement permanent, we will examine it closely in the antitrust subcommittee to ensure that it does not harm competition," Kohn said in a statement.[27] Through the flurry of activity, Google's competitive threat has remained constant, if not stronger and more stable. If your head is spinning, you're not alone, which is why we've at least attempted to clear things up with this visual guide to the saga, which is only likely to get more confusing. The Yahoo board, for its part, is expected to meet Friday to weigh the different scenarios. Of course, every analyst in the world--even those with more journalistic bents here at CNET News.com--has been trying to make sense of the moves.[46] The Wall Street Journal reported the Yahoo board would meet on Friday but said no big decisions were likely until at least next week.[7] "No one here, except Jerry and the board, has any enthusiasm for it," said one Yahoo executive.[41]
Yahoo, owner of the second most-used search engine, said in a presentation to investors last month that it narrowed the gap in the amount of revenue generated from each search query by 30 percent in the first nine months of last year. [22] A combination with Yahoo would give it access to the second-biggest search engine and a huge pool of consumers.[2]
Don't expect variable pricing to be switched on completely in one fell swoop. The change is launching in the United States and will arrive internationally later, spokeswoman Kristen Wareham said. It will begin with some keywords and eventually spread to all of them, she said. Yahoo alerted advertisers of the minimum-price change in February on its search marketing blog, and offered some answers to frequently asked questions page.[37] Discussions between Yahoo and AOL aren't making Yahoo insiders feel all that great. We have enough problems without getting theirs, which are much worse, said one exec.[18] Regardless of how this turns out, the technological integration for any of these players will be so substantial that in all likelihood, most of Yahoo (and/or most of AOL) will be jettisoned. All of these scenarios are ones in which the buyers are putting their competition out of their misery - they're buying out the competition and businesses on the decline.[26]
Flickr, Yahoo Finance, etc all have value that could be unlocked, but i'm not sure how. Maybe they should buy up the remenants of stage6 and integrate it with silverlight and flickr, and whatever their music offering is to create a super media and content delivery network.[26] Yahoo was once the hottest name on the internet but years of lacklustre management have erased that lead. Now it's hot once again, caught in a tug of love between four of the biggest media and tech companies on the planet.[2] Based on the Department of Justice's year-long review of the merger between satellite radio providers XM and Sirius, which it approved last month, it could be years before any Yahoo deal is consummated. 'It's going to take at least as long as, and with a change in administration, there could be further delays,' said Mr. Guryan.[3] The Justice Department and a handful of congressional committees have expressed interest in reviewing any merger. Lawyers have said that such a deal would be bound to receive intense scrutiny, particularly because of Microsoft and its past run-ins with regulators over its business practices.[36]
"A Yahoo-News Corp. deal or a Yahoo-Time Warner deal would allow us to sync our marketing capabilities. That's really exciting," McDougall said. Other advertisers said the Microsoft-Yahoo deal might alienate the ad community in more ways than one, if Microsoft start to make a pitch on why it's important.[24]
In your calculations, you forgot that it is very cheap to go short stocks today, via CFDs for example, in which case you could profit from the deal going bad (by shorting Yahoo).[32] I'm in yours (and likely most everyone else who reads me), so you should understand it by now. Henry, I wish you'd lay hands on Sorkin and get him to flesh out the likely source of the "billions" in Yahoo stock buy-backs that might come from an AOL/TW deal.[39]
The investment would let Yahoo buy back billions of dollars in stock, the person said.[22]
So far, Yahoo has rebuffed the overtures, calling the offer -- originally valued at $44.6 billion -- inadequate.[36] We believe we've made a very fair offer to Yahoo's board of directors," Kevin Turner said. "Currently, it's in their hands to decide the outcome of that offer," he said.[34] A takeover by Microsoft, the world's biggest software maker, is the most likely outcome, analysts and shareholders say. The board, which rejected the offer as too low, is weighing its alternatives, said the person, who declined to be named because the meeting is private.[25] A takeover by Microsoft, the world's largest software maker, is the most likely outcome, said analysts including Stanford Group Co.' s Clay Moran in Boca Raton, Florida.[22]
"Microsoft is not expert at doing acquisitions. It's a new idea for them in terms of big companies. This is their second one," Anderson said, referring to the company's buy of digital advertising leader aQuantive last year. [6] Not exactly a ringing endorsement for Yang and the board, which faces expulsion if Microsoft decides to go hostile and nominate a new board, forcing a proxy fight for the company.[18]
CARMI LEVY: Right, and I think there's recognition that Yahoo's current leadership team has pretty much run out of options in terms of positioning the company as a market leader in the future. They've gone as far as they can go, they've done as much as they can do, and I believe that new blood is needed, and I believe that Yahoo itself recognizes that.[47] Kern is an investor in several media and marketing companies, and Hippeau is managing partner of venture capital firm Softbank Capital Partners. Its parent company, Softbank Corp., helped start Yahoo's European and Japanese operations in 1996.[25] At the time, it was AOL buying Time-Warner, which even then, struck me as weird. Here you had this large media company, Time-Warner, with billions in assets, including the bricks-and-mortar kind, being bought by this major Web 1.0 player, AOL, who charged ridiculously high monthly fees for basic dial-up service that you could only use inside of their walled "garden" of ho-hum Web services.[26] Just like users of Internet Explorer. I've used AOL and Time Warners services and I'd say both are just as bad as MS for their own reasons.[41] The timing of the announcement expected on Monday is ironic as Verizon sued Time Warner Cable Inc last week accusing the majority-owned cable TV operator of false advertising related to Verizon's FiOS high speed Internet and television service.[28]
What do I know? I thought the merger of Time Warner and AOL was an ideal meeting of the old and the new.[26] AOL recently bought Bebo.com, Britain's biggest social network site, and remains a big draw on the web. AOL has been an albatross around Time Warner's neck since its takeover in 2000.[2]
The integration would be easier. (The biggest problem there is the historical animosity between Time Warner and News Corporation.)[26]
Fact is that MSFT does not have the technology in place in time to do search, ad serving and cloud computing (largely due to using Windows servers) to compete with Google. [26] Search engines - led by Google - still dominate the way people access the web and therefore the attentions of advertisers. Not so long ago half a dozen firms competed for those searchers and the ad revenue that followed them.[2]
Google still made as much as 70 percent more in sales from each query at the end of 2007, Sunnyvale, California-based Yahoo said. [22] Shares of Google, whose presence lurks in the background of the takeover drama, fell $5.85, or 1.3 percent, to $463.23.[19] Googles U.S. share has grown to 59.2 percent in February from 52.6 percent at the start of 2007, according to Internet audience statistics from comScore Inc.[17] Google fears that a combined colossus could limit user access to rival Internet products and give it too much control in e-mail and instant messaging, areas where it would hold dominant market share.[36]
'Jerry is doing the right thing for shareholders,' said Larry Haverty, an associate portfolio manager at Gamco Investors, which owned more than 1.2 millions shares of Yahoo at year-end. [3]
Something missing in the hypothetical MSFT going for AOL and MySpace in lieu of Yahoo is technical depth. When Bill Gates said he wanted Yahoo for the engineers, he wasn't entirely diverting.[26] The Yahoo bid was "a tactic and a strategy" toward that end, Turner said." The rest is now up to their board," he added.[34] The shares are little changed since surging 48 percent on Feb. 1, the day of Microsoft's bid.[22] Microsofts share is down to 9.6 percent in February from 10.4 percent in January 2007.[17]
Turner said Microsoft would "continue to drive market share from a search standpoint within the consumer space, and that's a strategy we're committed to in the long term."[34] Because of a decline in Microsoft's shares since then, the purchase is now valued at about $29.94 a share, as of today's close.[25]
The Microsoft chief has a reputation for being one of the most aggressive operators in the business world. Type "Ballmer" into Google and you will be directed to infamous footage of Ballmer bouncing around a stage like a gorilla shrieking: "I love this company." Subtlety is not his suit. [2] Microsoft is scared shitless about the online business apps coming from Google and other small players. I can tell you from personal experience that Microsoft doesn't have too many products, aside from their operating system, required by small companies.[32]
I run all of my email, calendaring, and other daily management tasks online through Google Apps -- for free. People often get wide-eyed when I tell them that I live a life free of Outlook and Exchange. Not only is it possible, but it's also relatively easy, and with time, it will only get easier. Another good example is Google's introduction of email archiving services, launched through Positini on the Google "cloud."[29]
Google is now the''company that looks unstoppable, and Microsoft's Vista is, by all descriptions, a flop. This doesn't sound like a space where I want to''place a''long-term bet on.[29] Is Microsoft going to be in trouble in three years? Will an AOL/Yahoo! combination be able to compete effectively with Google? Is Facebook the next Google? I have no idea. The nice thing about investing is that I don't have to know, and I don't have to be good at making these predictions.[29]
As a 35 year tech vet this is one of the more interesting scenarios that I've seen, even surpassing the Time Warner-AOL merger which was an amazing failure. Same assets, different group of mops this time around with Levin, Parsons and Case having passed on to where ever rich, exposed CEO's go. Now we have Yang (no clue), Bewkes, Schmidt and the boy wonders from Google and Rupert Murdoch on his quest to create ???? and Monkey Man, Steve Ballmer who has shown the ability to dance badly and little else in his tenure as CEO.[26] For several reasons, I MUST have, at minimum, one clerical person''' so she'''ll for sure be there the next time I paint the place. That won'''t be true for other clerical types that the ever-marching of technological change will send to the new-claims lines. Were MSFT to get this issue settled to the point that it's a matter of Wall Street beginning the process of discounting the pro-forma EBITDA that is anticipated from this merger, then MSFT's stock could move up pretty significantly over the period of the next, say, 18 months or so, given they can continue the earnings momentum of the last few quarters.[32]
MM, My Google/Yahoo analysis and speculation about a merger between the two is entirely that. just speculation. It's fueled by own theorizing of what a Google/Yahoo merger would look like and what it would mean for Microsoft. It would be crushing, devastating news for Microsoft, and it's scary for them likely because they suspect, as I do, that it could be pulled off.[39]
The industrial conglomerate said in its conference call with analysts last Friday that the backlog of wind turbines--i.e. orders that have booked but can't ship--has grown to $12 billion. Other investors included New Enterprise Associates and WPP, a marketing services company.[37] Chairman Roy Bostock and Activision Inc. CEO Robert Kotick joined in 2003. Mary Wilderotter, the only woman on the board, and Vyomesh Joshi, an executive vice president at Hewlett- Packard Co., both arrived in the past three years. "It's quite possible that the first instinct of people who've been there from the outset would be to look to see if keeping the company independent would be viable,'' said Jeffrey Lindsay, a New York-based analyst for Sanford C. Bernstein & Co. "The newer members don't have the same sentiment or associations with the company.''[25] The week was eventful for struggling cell phone maker Motorola Inc. as well. Motorola settled issues over control of its board with billionaire investor Carl Icahn and named a new chairman. Motorola headed off a proxy battle with Icahn, agreeing to back two of his board director nominees _ William Hambrecht and Keith Meister _ in exchange for Icahn dropping litigation against the company. Motorola said it elected former chairman and chief executive of AT&T; Inc. David Dorman as its non-executive board chairman.[33]
Soon, though, Yahoo will move to a variable minimum price, the company said Friday. [37] The tentative nature of talks means the nature of the proposed tie and other details remain murky. BUSINESS AS USUAL: Yahoo appears set on continuing as normal despite the mania surrounding its future ownership.[4] Most analysts are now betting that Microsoft plus extra cash will win the day. "It's got to end soon, right?" enquired one media executive involved in the talks.[2] Analysts say the test may be one more factor that could elicit a higher bid from Microsoft.[3]
For the time being, though, Mr. Ballmer hasn't budged, and is talking about a lower bid rather than a higher one. Whatever the outcome of this increasingly complicated dance, antitrust regulators both here and abroad will be poring over the competitive implications of any deal.[3] Steve Case, the head of AOL, was being hailed as a genius. His compensation for the deal proved that, at least financially, he was a genius. All this stuff about who may buy whom remains a mystery to me.[26] AOL deal is totally a crazy idea. AOL has so much problem that no one is crazy enough to buy them.[41]
Microsoft might be big evil and disliked, but AOL is just downright crap. The ONLY reason people still use their services in my opinion is because they just don't know better. [41] Microsoft brings little to the table with a continued reluctance to conform to internet standards and a seeming inability to create a working internet service.[10]
"We've heard a lot of noise today, and we've heard a lot of noise over the past two weeks, but there is still no viable offer in the market other than the initial offer from Microsoft," said Jim Friedland of Cowen and Co.[45] Microsoft chief Steve Ballmer threatened a proxy fight in about two weeks if the board didn't give in.[25]
Microsoft has already taken my former 4-secretary office and turned into one lonely trooper over the last 15 years. About all that'''s left for her to do is check the snail mail, answer the phone, do some minor administration, cut checks and fill out the few forms I don'''t fill out myself.[32] Kyle D in comment #20: Doesn't it make you a little suspect that Edward Mandel of NeXplore Corp is not only making grand generalizations about is going to happen to the world of Internet search in the next few years, but is also fielding his own search engine? He is not exactly a neutral observer of the scene.[26] Generations coming online now and in the future are infinitely more Internet savvy and will be much more discerning than present-day consumers. They will effortlessly break or sidestep old search habits. I believe consumers will demand more variety, immediacy, personalization, and rich-media in their search and social computing experience, and will disdain anything that comes close to a walled garden.''' For its part, NeXplore Corporation recently launched NeXplore Search (www.NeXplore.com), an innovative Web 2.0 search engine optimized for a superior end-user experience, rich-media display and social network integration.[26]
ABOUT ENLIVEN MARKETING TECHNOLOGIES Enliven Marketing Technologies Corporation (formerly Viewpoint Corporation) is a leading Internet Marketing Technology Company, offering Internet marketing and online advertising solutions through a powerful combination of proprietary visualization technology, and a Premium Rich Media advertising platform for the creation, delivery and reporting of PRM. Enliven's family of brands include Unicast, the Internet Marketing and Advertising Technology Group, and Springbox, the Creative Digital Marketing Solutions Group.[50] The company's technology and online advertising solutions are leveraged by some of the world's most esteemed brands, including AOL, GE, Sony, and Toyota.[50]
The California company's latest play, expected to be released today, pairs Google Apps a collection that includes Web-based e-mail, calendar, word processing and spreadsheets with online customer-relationship-management software from salesforce.com.[6] Are you aware that railroad right-of-way (yes, the ground near and under the tracks) played a significant part in up-ending Ma Bell? Is Google restricting any other company'''s search algorithms? or access to Google's own customers?[39] The regulators won't restrict Google just on size alone. Size is not the problem with monopolies, but rather the coercion and abuse that's often used to support them. Google has approaching a dozen competitors for search and they don'''t (to my knowledge) restrict their competition by applying coercive tactics to their advertising customers. They just beat their competitors''' brains out with a superior algorithm.[39] Google's market share in search, our source believes, exceeds the anti-trust share threshold (70%).[40] Now imagine 10 Googles, but that'''s easier to imagine because in the early days of search engines, that'''s about how many there were. Some of them are still around, and what do they accomplish in efficiency of search or in value to advertisers?''' Very little, or they'''d be Google instead of Google being Google.[39] What Google has combined is the best massive search engine with the least intrusive advertisements. NeXplore needs to pay for its server capacity somehow. Google has already figured this part out.[26]
Much of the drama revolves around the coveted search marketing business, which Google dominates.[24] Henry, I invite you to take my claim and lift it to its own topic. It's as good a time as any to debate the anti-trust implications, if any, of Google's business.[39]
I still read the local paper in print (it only has 1 section), but usually read the Times everyday on the web (which is one of the few old media companies that has successfully translated to the new, and actually is an improvement on the internet.) I may or may not watch TV at night, but then moving images on the web is still in its infancy, along with storytelling in novel form.[26] Meanwhile a new breed of search and social computing company is surging through the Internet.[26]
You want to take me on? Here's your task if you do: You'll have to prove that Google's search technology does any one or more of the following: harms the consumer; hampers innovation and efficiency; distorts markets; extorts or coerces competitors; prohibits cost reduction (productivity); fixes prices''' '''but that'''s not really a complete list, Walter, in case you'''re already breaking out in sweat looking for something to cling to under my withering heat. I know my heat, it's good stuff.[39] Search globrix.com to buy or rent UK property. This service is provided on Times Newspapers' .[31] Members agree the reasoning behind incorporating was mainly logistical. "It's not like we have a set of rules or anything," said Will Castleberry, national director of state public policy for coalition member AOL, who called the incorporation "pro forma." "It makes it easier to do billing and reporting," said DelBianco, noting individual member organizations and companies each lobby legislators, which involves time and travel expenditures. "We share costs," he added.[44] In addition to opening its new New York headquarters today, AOL (NYSE: TWX) is churning out announcements to highlight its Platform-A and expanding web presence:.[52] Bazinet opines that with MySpace, News Corp. is "facing a more daunting long-term battle for relevancy than even AOL." For now, though, Murdoch is playing his hand from a position of strength.[9]
SOURCES
1. Yahoo board OKs meetings with suitors
2. Who's next, Yahoo? - Times Online
3. AOL Yahoogle? MySoftNewsCorp? With this crowd, anything's possible - Financial Week
4. TelecomTV - TelecomTV One - News
5. AOL-Yahoo! deal 'imminent'
6. Microsoft | Will Microsoft or Yahoo put together a winning hand? | Seattle Times Newspaper
7. Microsoft seen as winner for Yahoo - International Herald Tribune
8. AOL could benefit in Yahoo deal - Entertainment News, Business News, Media - Variety
9. The digital dance begins - Apr. 11, 2008
10. Yahoo Tries Out Google Ads, Teams With AOL - Profy.Com
11. Update: Clash of the titans: Yahoo's fate in the balance
12. PC World - Business Center: Yahoo Weighs Options as Microsoft Drama Continues
13. Microsoft prefers own Yahoo bid among options: source | Reuters
14. Report: Yahoo, AOL may combine forces; News Corp. talking to Microsoft
15. Yahoo To Test Google Ads On Its Search Results Page
16. Latest Reports from the Microsoft-Yahoo! Front @ AJAXWORLD MAGAZINE
17. Yahoo to test Google ads as defence vs. Microsoft - International Herald Tribune
18. Yahoo Juggles Its Options With Microsoft
19. Big Yahoos Meet
20. Verizon (VZ) to give online sales to AOL - BloggingStocks
21. In Coup, Platform-A Lands Ad Deal With Verizon » Adotas
22. Bloomberg.com: U.S.
23. Higher antitrust bar for Yahoo-Google | Special Coverage | Reuters
24. L'affaire Yahoo is tres banale to Madison Ave. | Tech news blog - CNET News.com
25. Bloomberg.com: U.S.
26. Is Yahoo the Odd Man Out? - Bits - Technology - New York Times Blog
27. Yahoo, Google enter into search ad deal: Times Argus Online
28. AOL lands Verizon advertising deal | Reuters
29. Microsoft Shouldn't Swing for the Fences
30. AOL Reaches Ad Deal With Verizon | WebProNews
31. Yahoo! holds council of war on Microsoft plan - Times Online
32. "Yahoo-Microsoft Done Deal, Only Question is Price." Unless MSFT Walks - Silicon Alley Insider
33. Tech Roundup: 'Microhoo' Saga Heats Up | Chron.com - Houston Chronicle
34. Micro Who? Google Rules The Ad Roost - Forbes.com
35. Yahoo considers options | ajc.com
36. Lobbying fight is waged in Microsoft's bid for Yahoo
37. Yahoo refining search-ad bidding process | Tech news blog - CNET News.com
38. Yahoo, Time Warner closing in on AOL deal - International Herald Tribune
39. Yahoo To Meet With Microsoft Next Week (And AOL) - Silicon Alley Insider
40. Is Google-Yahoo Search Deal Illegal? Maybe. Does This Matter? No. - Silicon Alley Insider
41. TG Daily - Yahoo morale down, unexcited about AOL talks
42. Microsoft-Yahoo takeover battle adds new twist with Google ads : Markets : Ventura County Star
43. Microsoft says Yahoo/Google deal anti-competitive - International Herald Tribune
44. Google, AOL and Others Make State Policy Coalition Official - ClickZ
45. The Columbus Dispatch : Investors expect Yahoo sale
46. Week in review: Microhoo, Yahoogle, and Microspace, oh my! - CNET News.com
47. BetaNews | Carmi Levy: Yahoo's options, now that it appears to have some
48. Yahoo in talks to use Google search ads - International Herald Tribune
49. AOL Beats Google In Reach And Time Spent In Russia | WebProNews
50. Enliven Announces Extension of Yahoo! Search Agreement
51. Yahoo!-Google deal 'could face legal opposition'
52. AOL: Verizon Hands Online, Mobile Ad Inventory Over To PlatformA; New Taiwan Web Portal - washingtonpost.com
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