Gossip

Can it really be the case that Yahoo's CEO doesn't know the company has become roadkill on Al's information superhighway? One has to wonder.

The advertising--not the search arm--of Yahoo was really the only hope for the company, but it never managed to get it up and running. The complete capitulation by Yahoo to Google's automated online advertising juggernaut was the end for the company--although it is not a poison pill. (Do we hear antitrust suit? Duh.) So the company remains an attractive buy--but only for the buyer positioned to challenge Google in the advertising space. And that company is Microsoft.

So recent Wall Street Journal speculation about Softies seeking a partner (Time Warner? News Corp.?) to help them go in and try to buy Yahoo again seems to be based on a complete misunderstanding of the Internet and what's happening to the media business. On the other hand, CEOs and VCs have blown billions (and continue to blow millions) due to a complete misunderstanding of the Internet and what's happening to the media busines, so why should this case be any different?

While it's true that Yahoo does the best job presenting a useful old-fashioned portal (remember the mid-nineties when everyone on the planet was going to build a portal to the Internet, including Time Warner?) and Google does a surprisingly poor job (witness the constantly out-of-date Google news page), that's not where the real value lies going forward. In the future, search will continue to be big, but the real hook is advertising, and Yahoo was close to getting something off the ground when Yang hit the stop button. (Now you know why all those Yahoo execs have been doing spectacular somersaults out the exits.) 

It's extremely unlikely that Microsoft will find a partner in this deal. Yahoo's value is specific to Microsoft. No other company can leverage Yahoo's assets and make a run at getting an advertising machine up and running to compete against Google. And Google is vulnerable. Its Adsense program, for example, lacks any customer support (machines that don't answer questions don't count) and it is the subject of countless complaints from clients--and advertisers.

So I'm sticking with my earlier prediction: Microsoft buys Yahoo in August. (Yes, August 2008, smartiepants.)

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In the world of mergers and acquisitions, it's never over.

Folks are selling their Yahoo shares after Microsoft abandoned its efforts to take over the company last weekend, but they might want to start buying again in July.

Yes, Yahoo wanted more money than the company is worth (assuming one puts any credence in the valuation of Internet firms when the reality is that a new site can knock out a leading competitor in a couple of months). But it's clear that Yahoo will be worth even less if it follows through on an advertising deal with Mr. Potter, er, Google. That would represent total capitulation in the one promising area of future revenue for the firm. And that's also the one hook that Yahoo had for Microsoft: the potential to combine forces with Microsoft on the Internet ad front to compete with Google.

So, my bet is that Microsoft's Ballmer will launch another takeover bid when Yahoo's shares dip below $20 again. And since M&A kids love to ruin an acquisition target's holidays, send lawyers into double-triple overtime, and look for the bottom price, I fearlessly predict that in August, we'll all be covering this story--again.

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JustSayNo

One wonders when Yahoo will wake up and smell the cat food. (Microsoft's cat food, that is, to contort a musical sub-reference into a tech marketing quasi cliche.)

Naturally, Yahoo had to at least nominally (and oh so predictably) reject Microsoft's initial offer, but as the days of speculation drag on, the discussion seems about as serious as considering another Nader run for the presidency (okay, never mind the fact that Ralph is actually taking that idea seriously).

Sitting in the green room at Fox the other day and watching the Yahoo-Microsoft banter (which included the possibility that some of the largest Yahoo shareholders could sue if management doesn't take the deal), I could not help noticing that no one's heart was really in it. What everyone wanted to say but simply couldn't say on the air is that this deal is done. It's logical, obvious, and necessary for both parties. It's even a necessity for Google (they desperately need the competition or they'll die like Woody Allen's shark, and it will blunt the growing anti-trust problems Google faces).

And the idea that has been floated of melding AOL and Yahoo is such a terrifically terrible idea (and the source of endless jokes in New York), it only serves to underscore the fact that the Microhoo deal is all but done. The preposterous AOL idea--let's give Time Warner Yahoo so that it drive it straight into the ground like its other online endeavors (as if that would preserve Time Warner's core businesses)--illustrates in high-contrast colors that Yahoo has no other option than to accept the Microsoft offer. Joining with AOL is almost as crazy an idea as letting Mr. Potter "help" George Bailey (hello, Google?).

The cynics among us, of course, are going to point to the rather half-hearted rejection from Yahoo as being utterly disingenuous. There wasn't even any indignation in the tone, they'll say, which has been standard operating procedure in dealing with Microsoft proposals for over a decade and a half. A lack of indignation means you (nudge, nudge, wink, wink) really want to be acquired.

So, Yahoo's apparent rejection reminds me of those wonderfully subversive Nancy Reagan era "Just Say No" buttons that when tilted said "Yes!" Maybe someone should get a box of the buttons and send then to Yahoo HQ. 

Those who want to bet on when Yahoo will officially accept a Microsoft bid can post their bets in the comments section here....

Update: Apparently some major Yahoo shareholders agree that this is all but over. See The Deal's Legg Mason: Yahoo! in a "tough spot."

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Whew!

Microsoft has been after Yahoo for a while now, but this week the folks in Redmond made it official: They really, really like Yahoo. But do we really, really like the idea of a $44.6 billion purchase?

For tech veterans, the knee-jerk reaction would be to scream antitrust (remember when Microsoft was about to be broken up, and for good reason, until that journalist went and blabbed). However, if one is concerned about privacy issues, unfettered use of personal data, and an almost complete  lack of price competition in the online marketplace, Google is more of threat these days than Microsoft. Just take a look at how Google manages Adsense--or rather doesn't manage it.

A Microsoft-Yahoo merger (er, I mean purchase) would provide some much needed competition for Google. While Google is innovative, it can also be flaky and tends to lack focus (notice how Google Earth, a great idea, crashes systems at the click of a mouse). On the other hand, Microsoft is steady, but it's never been that innovative (e.g., Web-based mail, custom online databases, online blogging software, online mapping software, heck, even its Web browser have all been me-too products). So competition from a Microhoo could force Google to focus and deliver better hands-on service to customers. It might even relieve fears that the online ad world will become a monopoly. And who knows? Microhoo could become a more innovative force in the online world.

Bottom line: "Woo-hoo!, It's a great idea."

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