Category Archives: yahoo

Microsoft, Facebook and Twispers

Do you remember playing Whispers, Operator, Telephone or Chinese Whispers (UK) — where one person whispers a phrase to another person, who whispers it another person…until the last person hears something significantly distorted from the original phrase?

I’ve seen it play out many times in the blogosphere, with the added incentive that bloggers gain traffic/celebrity by twisting things to give their post an “angle” and fuel controversy. The speed of distortion only increases with Twitter. It usually just makes me chuckle, but with the influence/agendas of some bloggers it can border on business tampering. If this weekend’s Microsoft/Facebook story continues to morph as it already has in 2 days, there could be billions of shareholder dollars at stake.

Over the weekend Microsoft released the following statement:

““In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.

“There of course can be no assurance that any transaction will result from these discussions.””

Pretty straightforward, no mention of Facebook, no mention of locking anything down.

John Furrier combined that statement with some rumors he was hearing:

“Why would such a complicated transaction (just Yahoo search with all the headaches and all) be in the cards for Microsoft? After the failed bid for $40 plus billion for all of Yahoo, Microsoft’s intentions are clear. Buy the search business from Yahoo and take that team and go spend at least 20 billion for Facebook. Integrating the search team at Yahoo with Facebook puts a formidable army to take on Google.”

Distortion #1: “Microsoft’s intentions are clear…go spend at least 20 billion for Facebook.” Clear?!? I saw no mention of Facebook in Microsoft’s statement. At least John didn’t claim anything would be locked down, just a formidable integration.

Robert Scoble then expands on John’s post to claim:

“Google is locked out of the Web that soon will be owned by Microsoft. We will never get an open Web back if these two deals happen….It’s Facebook and Microsoft vs. the open public Web.”

Distortion #2: “It’s Facebook and Microsoft vs. the open public Web” Robert doesn’t state any plans by Microsoft to lock anything down, but he does play the tried-and-true “open vs. close” card.

Then, Umair Haque takes Robert’s bait (or maybe John’s) and adds a litany of open vs. closed buzzwords for Harvard Business Publishing:

“According to an interesting rumour making the rounds: Microsoft is to acquire Yahoo’s search business as well as Facebook, and lock both down, to better take on Google….Microsoft is trying to shift from open to closed….That’s what evil really means: coercing others into accepting value destruction….Mark Zuckerberg and Steve Ballmer’s hare-brained scheme for world domination…Microsoft’s move is a textbook example of how not to think strategically at the edge….”

Distortion #3: where do I start? Somehow we got from a Microsoft statement about Yahoo to “Microsoft is trying to shift from open to closed” with a couple good vs. evil references for spice.

Not only does this game of Whispers continue with republished out-of-context quotes, but it even comes full circle with John’s follow-up Twitter promotion of Umair:
Furrier: @kellyrfeller you should sub to this blog by Umair he’s strong on strategy”

There have been many names for this whisper game over the years. I wouldn’t be surprised one day to find my kids calling it the Blog Whispers game…or maybe even Twispers 😉

Why GOOGopoly Cannot Buy Yahoo!, Even if They Try to Annoy Microsoft Anyway

Microsoft announced today a bid to buy Yahoo! for $44.6 billion. First, let me say “wow, that’s a big number and this deal, if completed, will have big consequences.” Steve Ballmer extended the offer by phone to CEO Yang and sent the following letter to the YHOO board:

January 31, 2008

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use – EBITDA, free cash flow, operating cash flow, net income, or analyst target prices – this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft 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.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!’s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer

Steven A. Ballmer

Chief Executive Officer

Microsoft Corporation

There is plenty of speculation about how GOOG might react. I think the bigger question is whether YHOO will take the offer, but GOOG could still be an annoyance. MSFT and GOOG have been here before, on small deals and on big ones like DoubleClick. However, this one is different.

You see, GOOG currently dominates the market of Search Advertising (direct & indirect) — already confirmed by the FTC during their DoubleClick review, when they found:

“Google, through its AdWords business, is the dominant provider of sponsored search advertising”

DoubleClick got through because the FTC’s review largely focused on Privacy and because DoubleClick didn’t add to GOOG’s monopoly in Search Advertising. YHOO, on the other hand, would be an acquisition of their largest competitor for Search Advertising (direct); on the heels of manual, targeted anticompetitive actions against Search Advertising (indirect) competitors like TextLinkAds (how, again, is a search for “text-link-ads” more relevant with removed from the top spot and replaced with TLA competitors?)

GOOG may throw some head-fakes internally or externally to complicate the deal, but they cannot buy YHOO. In fact, their time would be better spent educating their entire organization about the risks created and opportunities foreclosed by anticompetitive behavior. Even if the YHOO shareholders take the 60% premium being offered for their shares, GOOGopoly will still be the dominant provider of Search Advertising. That means power, and consequences — just ask Microsoft…

Related posts:

GuessNow: Can Predictive Markets Be Fun?

I’ve always been intrigued by the potential of predictive markets: speculative markets created for the purpose of making predictions. That’s why I was excited when Delray Beach, FL-based GuessNow contacted me about sponsoring an FVB review via PPP Direct. It was also timely because I’m following up my completion of Chris Anderson’s The Long Tail, with James Surowiecki’s The Wisdom of Crowds.

The broad idea behind predictive markets is that large populations of people, who stand to benefit from accurate predictions, can become an engine for predicting future events. If you read the wikipedia article I linked above, you’ll find that there is some controversy around the accuracy of results and various approaches to received optimal results. has an interesting management team, with John Ferber leading the charge as CEO. John, with his brother Scott, previously founded before selling it to AOL in 2004. I like serial entrepreneurs. I like the connection of advertising minds to predictive markets, because I’ve seen too many companies pursue “cool ideas” like artificial intelligence, behavioral modelling or predictive markets with business models as a secondary concern. I also like that the site feels a bit more engaging/fun than you might expect from a predictive market.

Turning to the site itself, I thought John’s incentive system was interesting. Instead of a pure stock market type of system with various prices for different outcomes, GN implemented a point system. Specifically, users can earn points for answering questions correctly (more points for correct, fewer points for incorrect), answering questions early (more points for early, fewer points for later), and avoiding group think (more points for correct answers going against the crowd). They also have a bonus point system for site participation and advertiser offers, but I don’t entirely understand the “bonus” section of the site — that section feels more like rewarding site behavior and CPA advertising than predictive.

Points are then redeemed for cash, according to a “point value” decided by the total Prize Pool for a month divided by the total number of points awarded in that month. For example, if 500,000 points are awarded in a month with a $5,000 Prize Pool, then each point is worth $.01. If you earned 1,000 points that month, then your points are worth $10.00. I believe a similar calculation happens for the Bonus Prize Pool and bonus points.

They have a good set of questions, including topic areas such as:

Some of the questions I’ve answered include:

The model is pretty flexible. In addition to predictive questions, I also noticed trivia-type questions (e.g. “name the state that…”) and survey-type questions (see hybrid car question above). It’s not clear these are necessary to keep people engaged for predictions, but I can see them opening monetization options.

A few of my suggestions include:
1) I loved some of the higher level data concepts such as accuracy ratios, friction and confidence levels — find ways to share that data and reward publicly on these;
2) I know the “Shocking New Video” ads are probably prompted/related to your Miss Internet Pageant 2007, but they could be a tad risque for the diverse demographic good predictions will require; and
3) I may have missed it, but I couldn’t find where to compare past group predictions with past actual results — that is the question everyone has about such markets and there has to be some data you can share, probably great linkbait.

And, lastly, I’d be remiss if I didn’t mention GN’s points-based affiliate program and blog. I don’t know GN’s funding status, but this review has prompted me to dig a little deeper. Thanks for reaching out to me guys!

(sponsored post)

What is the Meaning of Life? Ask Yahoo!

When Yahoo and Google each launched their Answers platforms I was cautiously optimistic. I mean, where better to ask “What is the meaning of Life?” in hopes of distilling insight from a world of perspectives.

Since those launches, Yahoo has done better than I expected, while Google has done worse (AKA, dead). This post isn’t about comparing the two services, but I will note that Yahoo Answers benefited from a more social atmosphere (helping instead of consulting) and recently launched even more social aspects.

Although I’ve watched, I never actually asked or answered a Yahoo Answers question until today. In learning more about the service, I provided answers to a couple softball questions:
1) What is Venture Capital?
2) What advice would you give a start-up company?

In exchange for doing so I received 2 “points” for each answer, with the potential for more points if my answers are chosen as the best. I haven’t used the service enough to know why I should be excited about these points, but the potential for focused knowledge sharing is exciting enough.

If you haven’t tried Yahoo Answers you might want to, particularly if you can share some insights on the Meaning of Life, only 3 days left!

Yahoo Buys the Future of the Internet, er MyBlogLog

Eric and the MyBlogLog guys made it official last week — Yahoo has acquired MyBlogLog. I couldn’t be happier for the whole crew over there including Eric, Todd, Scott, John, Steve and even the CloudSpace cheering squad. I’m especially proud of these Florida natives making such a loud and successful blogosphere impact.

Yahoo now has a powerful blog community/analytics platform in their quiver, but there’s a fork in the road. They can continue to grow organically in the blogosphere while the world catches up to face-aware browsing, or they can chart a bolder course that extends well beyond blogs.

I touched on this back in June when I first uncovered MyBlogLog because I was proactively looking for the uber-social network, that travels with you. MySpace, FaceBook, and the 1,000 dwarves are all domain-specific social networks that are powerful, but handicapped. The full potential of social networks exists across domains — allowing you to see/connect others in your network who researched the same vacation you’re researching, who bought the same camera you’re considering, friends to chat with about the video you’re streaming or friends who want to leverage group buying power for the latest FJ Cruiser.

At least three tweaks are needed to make this possible:
1) aggressive expansion of MBL/widgets beyond the blogosphere to research, commerce and entertainment sites;
2) social intelligence beyond just contacts and site visitors, allowing you to see who, specifically from your network, recently visited a site you’re at; and
3) a solid API to enable sites to build upon that awareness to unlock group buying, group research or other social network value that is absent from today’s domain-centric approaches.

This will take money and manpower, in parallel to letting MBL grow organically in the blogosphere. If Yahoo pulls it off aggressively instead of passively, however, it could be the social paradigm for all future surfing, media consumption and online commerce. Sound crazy? Maybe so, but if Yahoo/MyBlogLog doesn’t do it I’m looking for the entrepreneurs who will…

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