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Yang’s options shrinking fast
February 1, 2008
Jerry Yang must be starting to understand how Alfred Chuang of BEA Systems felt when Larry Ellison of Oracle came calling last year. Like Chuang, the Yahoo boss has just been landed with a takeover offer at such a big premium that he can’t possibly just ignore it. Also like Chuang, the options for other deals - or for staying independent - are shrinking fast. Here are the other partnerships or alliances that Yang could have grabbed at in the last year or so, and the chances that he can turn to them again now as he looks for an alternative to Microsoft:
News Corp, sensing the chance to consolidate its position on the internet, at one stage proposed combining MySpace with Yahoo in return for a large stake in the internet portal. For Rupert Murdoch, the opportunistic move would have meant trading the hot social networking site for a slower growing but far more stable property, but Yahoo saw less value in the idea. To judge from the noises emanating from around News Corp today, there’s little interest in trying to revive the idea.
Time Warner has also at times considered something similar for its AOL unit, merging it into Yahoo and keeping a piece of the action. If Yahoo falls to Microsoft, Time Warner will be robbed of its two most obvious partners as the online advertising market consolidates, so Jeff Bewkes might be expected to try to intervene. However, people close to Time Warner seemed distinctly underwhelmed by the thought of wading into the fray against Microsoft.
This has been one of the more intriguing options. Yang is said last year to have considered out-sourcing Yahoo’s search advertising to Google. Project Panama, the overhaul that was meant improve the efficiency of Yahoo’s search advertising system, has been only a qualified success: Yahoo could boost its earning per share by 25 per cent by partnering with Google instead, according to Mark Mahaney at Citigroup. As Yahoo searches for ideas to boost shareholder value while staying independent, this looms as the most likely alternative. Much will depend on whether Google wants to go head-to-head with Microsoft in such a direct way.
A higher offer from Microsoft to win over Yahoo’s board seems the most likely outcome. A year ago, before Yahoo’s shares hit the skids, Microsoft was willing to pay $60bn, according to one well-placed source. Times have changed and there’s no way Yang can hope for that kind of happy ending any more, but holding out for a bigger pay-day still seems his best option.
This is about much more than the MSFT or Yahoo! stock price.
Yahoo! is proving that it cannot handle the operational side of its business as well as it should. It would be able to learn a lot from Microsoft.
An acquisition of this size would also revitalise Microsoft as an organization.
Microsoft does not have great relationship with consumers. This is Yahoo!’s strength, as are its now very good search and content matching algorithms (the Panama project).
I think the combined group would be of particular benefit to online advertisers, who could expect improved service from Yahoo! (it’s not currently very good).
Analysis at: www.digitalmarketing.us/blog
Posted by: Rusty | February 4th, 2008 at 7:43 am | Report this comment“YaSoft! or MicroHoo! ?”
I think we should look outside of the G-8 countries to unravel this deal.
While it’s true that MS, Y! and GGL are huge in the PC Internet world, they are largely unknown in the Mobile world in countries outside of the G20. Folks in emerging economies are yet to access the internet. What will they do when do get on (from simple mobile phones)?
Why they’ll do exactly what we did 10 years ago. Get a free email account, get some news etc.
Yahoo’s primary assets are
1. Users
2. Biz relationships (Media/ATT etc.
3. Engineers
4. Brand.. bigger than Google in Japan/China/India indeed in much of the countries outside of the G20
5. Products:
a. email.. Yahoo mail will become Hotmail (better brand)
c. IM,
d. Photo sharing:Flickr (was a North Am Phenomenon) may wind down and merge with LiveSpaces.. Microsoft has excellent Desktop Photo management s/w so this will get better.
c. Portals, Goodbye to MSN.. and Live.. both silly in name and execution.
In short I’d expect Yahoo to become the brand of Internet and Microsoft will continue to grow it’s foothold in phones and offer simpler tools to the new phone user.
Perhaps Microsoft can build on its increasingly viable WinMobile OS to drive more products to the huge non g20 users.
Expect Hotmail to win, because it is the simpler product and is the ideal product for first time email users.
So what doest this mean for G8 users?
Already Microsoft is gaining impressive deployments in Cars (soon planes). In such demanding situations, the user is happier to be fed information than have to select & search.
So while a few million users may be hot to trot with the Iphone, if you’re really cool you’ll be GPSing, emailing/faxing, Voiping from your Car’s Yahoo service, running on a WinCE car computer, connected to your homes Win Homeserver, trading bytes on an ATT/Verizon hispeed backbone, taking your hispeed with you with your car, all while the kiddies play xbox games on the rear screens. It’s here that OS strengths of MS is going to come into play.
I fear google is about to get outflanked. It would be ludicrous for MS to go full frontal on Google (MS will loose).
Summary: I predict a two step fight. In the US/West EU it will be
a. Living room (TV)
b. Car/autombobile
in Emerging economies it will be simple camera phones.
a. Email
b. Games
c. Portals (think 1999)
d. Simple search
Branding:
PC/SW Microsoft
Gaming: Xbox
Internet: Yahoo
Google has a branding weakness, it’s too heavily ID’d with search.
Posted by: R | February 4th, 2008 at 10:15 am | Report this commentAs the Financial Times mentions in its op-ed the other day, 1) the “online advertisement platform market” will lose competition, which is why “Microblob” wants to buy Yahoo! ,2) and in my opinion also to control its bulletin boards-messages-groups,3) so the “anti-Monopoly ” teams in D.C. and Brussels must look hard to avoid ending with only a few “ad brokers”, maybe even just 3, a disaster for the consumers !….4)and going mobile,even worst with MS/Yahoo making “closed deals” with all the Phone carriers: a nightmare!
sad that Yahoo!, which just got out from under neocon T.Semel grasp,after he made 730 million dollars in stock and salaries for wrecking the company and “ratting” 3 chinese bloggers to the Chinese Gov.which give them 10 years in jail to each, could not even jumpstart its new search engines and messaging boards/mobile to get some traction, it shows how tight the neocons operate ! and it shows that MS is bend on controlling all mobile / fixed ads markets, a disaster for the small independents,like Opera,like Linux,like AMD, etc., some inside MS are dreaming of an Universal Internet controlled by them ,Murdoch and Qualcomm , what a shame !
this shows how important laptop.org/ is , with AMD ,Linux and Google, this great little laptop must be on every kid’s desk, on every country and next to every mobile in the developing world, what a great way for the West to introduce good will and hope to the world,the peacemaker.
Posted by: blogger | February 4th, 2008 at 6:32 pm | Report this comment