The Nexus of 2024

Yahoo!?!?!

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jon
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Todd Bishop’s Microsoft goes after biggest buy ever to catch up with Google in the Seattle PI has the most common framing:

Could a PC software giant and an Internet icon join forces to take on the Web search king?

That was the big question Friday as Microsoft Corp. stunned the online world with a bid to buy Yahoo! Inc. for nearly $45 billion in cash and stock — a blockbuster proposal that could reshape the industry by combining two tech veterans in a battle against search leader Google.

Steve Lohr covers similar ground in Yahoo Offer Is Strategy Shift for Microsoft (no, ya think?) in the New York Times.

Analyst Henry Blodgett’s take: “This is a brilliant move by Microsoft–a big premium dangled in front of battered Yahoo shareholders, but a price that would have seemed absurdly low as recently as six months ago.” who da’ punk is more skeptical, but keeping his mind open:

My first reaction: “That’s a lot to pay for flickr.”

…

If the buy goes through, it will be one huge turning point for Microsoft: I think we’ll either turn it around brilliantly and our mega-investment will be worth it, or we’ll be torn asunder and revert back to our core cash cows. It will be a story worth telling, one way or the other. In the meantime, that big huge money-chest is going to go empty, and that might bring a new sense of clarity to our operations.

My initial reaction is surprisingly positive, although obviously the risks are high. More thought required, of course, and I reserve the right to change my mind on further reflection. That said, this fundamentally and irrevocably shifts the center of gravity at Microsoft away from the past and towards the future.

More in my comment on Mini, along with excellent comments from Anonymous @1:30 a.m. from Microsoft’s Live Services group in Silicon Valley (“So so negative here, and so much backward thinking”), my pal patronizer (“Everybody knows that the recommended cure for Yahoo’s woes was to outsource their search back to Google. It’s an economic (and technologic) no-brainer. Want to avoid that? Got to pay.”) and others.

It’s on Slashdot too, although currently the discussion on Mini is noticeably better.

Thoughts?

Update: New thread on Mini over the weekend, updated after Google’s response.

Comments

8 responses to “Yahoo!?!?!”

  1. jon Avatar
    jon

    Google’s Senior SV (SVP) David Drummond responds on the Google blog:

    The openness of the Internet is what made Google — and Yahoo! — possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It’s what makes the Internet such an exciting place.

    So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

    Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?

    As Maddy says on the Boing Boing thread, this from the people who bought YouTube? And DoubleClick, I might add. Still, especially in a climate where US anti-trust supervision has just been extended to 2009 and Microsoft similarly missed its original deadlines in the EU, these are very valid and important questions.

    Microsoft’s Brad Smith responds, basically saying “they’re still a lot bigger than us, and we’re committed to privacy. It’s one of those weird press releases where three short paragraphs of content are followed by five longer paragraphs of disclaimer. A blog post might have been better for Microsoft as well.

    Reply
  2. Michael Avatar
    Michael

    MSFT and YHOO culture not all that different: The article says YHOO has got more stuffy over the years, and MSFT has got hipper…

    http://news.yahoo.com/s/ap/20080204/ap_on_hi_te/microsoft_yahoo_clash_2

    And the main thing they reference to say MSFT is getting more hip: “…including inviting programmers to gather once a month in bean bag chairs to brainstorm and collaborate on cool Web projects.”

    Glad to see they noticed our efforts of culture change (I knew those pink beanbags were memorable) coming out of the MashUp group.

    Well, it’s official then…we changed MSFT culture…it’s in the press!

    Michael (co-conspirator in the creation of MashUp days)

    Reply
  3. jon Avatar
    jon

    Wow, very cool Michael, thanks for mentioning this! Jessica Mintz, who wrote the article, was at our Mashup event at the MVP Summit last March, and I remember having a great conversation with her while sitting on a couple of those chairs …

    Alas, nobody wanted to reuse the pink beanbag chairs after I left; and so they were donated to a local non-profit. Still, as you say, the impact lives on!

    jon

    Reply
  4. jon Avatar
    jon

    Mini’s got another thread up on this, coming out firmly against it … here’s what I said:

    And for all the people saying that Microsoft should just spend the money investing more in MSN: I do agree that there’s been severe under-investment, but given the way “the street” views operating expenses vs. acquisitions, this money is coming from two different pools.

    I do want to see the strategic importance in this huge, complicated take-over. I do want to believe. If … the acquisition goes forward I need the influentials in Microsoft leadership to connect with me and convince me to believe that this is indeed the next important foundation for Microsoft.

    Totally agreed. And presumably the logic they’d use to convince employees would also help with the press, analysts, investors — and Yahoo!

    Of course I cut out a few words there … Mini had originally written “If this is all about ads …” and then went on to say “but for us to bet the company and build Microsoft’s future foundation on ads revenue? WTF?” I think this is oversimplifying in a couple of ways.

    First of all, Yahoo! is fundamentally a media company (that just happens to monetize primarily via advertising). If Microsoft’s serious about competing with consumers — online, with XBox and Zune, and increasingly with operating systems — it needs to get a lot more of this perspective. Yahoo!’s the most technology-focused of any large media company; unless Microsoft wants to retreat to the enterprise, it’s hard to pick a better partner.

    Secondly, advertising is only one of the potential revenue models: subscriptions and micropayments are also extremely plausible. Yahoo!s offerings including their portal, Messenger, Flickr, Y! Answers all have a lot of possibilities with any of these models — and with Zune taking the lead on MS Points, Microsoft has some really technologies in micropayments.

    Third, at least for the time being the advertising market is huge and extremely profitable; and unless you want Microsoft to give up on one of the few multi-billion dollar spaces it’s got a shot of expanding into, you need to look at how this fits in. One significant thing about the aQuantive acquisition was that their agency portfolio; this is a great try at a flanking maneuver with Google, and Yahoo!’s media presence is like gold from that perspective. In addition, the dynamics of the search keyword market in particular mean that there is a virtuous cycle as your market share increases: additional high-quality inventory attracts more advertisers who bid up the value of keywords. This is one of the very few options Microsoft has for buying eyeballs. [The same is likely to be true for messenger and mail as people get better at monetizing them. Also, this shores Microsoft up in the display ad space, which is likely to come under pressure as Google integrates DoubleClick.

    Which isn’t to say I think the deal’s a no-brainer; I’ve been busy with other things, and so am still where I was before: initial reaction positive (although high-risk) if things had gone through at the initial offering price. As it is, we shall see …

    Still, I think it’s important to be analyzing it taking these strategic perspectives and the online business models into account.

    jon

    Reply
  5. Liminal states » Blog Archive » Mashups and teaching dinosaurs to dance

    […] the Yahoo!?!?! thread, Michael Foster posted about Jessica Mintz’ Microsoft-Yahoo could skip culture clash, […]

    Reply
  6. jon Avatar
    jon

    Dare Obasanjo (aka Carnage4Life) has some good things to say in To Mini-Microsoft: On Building Software Experiences that Delight Users, including

    Specifically, it is hard for me to imagine that there are more people in the world that think that whatever Microsoft product Mini works on has given them more delight or improved their lives better than Facebook, Flickr, Google, MySpace or Windows Live Messenger which happen to all be ad supported software. Thus it amusing to see him imply that ad-supported software is the antithesis of software that delights and improves peoples quality of life.

    Indeed.

    Speaking of which, there’s a good Slashdot thread quoting emails from Windows executives including Mike Nash and Jim Allchin about their not-so-delightful experiences with Vista.

    Reply
  7. jon Avatar
    jon

    I’m cruising around the blogosphere catching up on this. Henry Blodget astutely notes

    Yahoo’s “rejection” of Microsoft’s $31 bid isn’t a rejection but a counter-offer of $40 a share. It remains to be seen whether the company will state this explicitly in its letter to Microsoft (unlikely), but it has already sent the message through theWall Street Journal. So the next question is…how will Microsoft respond?

    Philip Greenspun questions the Yahoo! board’s sanity, as does Maryam Scoble, while Robert Scoble concludes that Yahoo! thinks they can get more.

    The consensus is that Yahoo doesn’t have a lot of plausible options (it’s really hard to see how any “outsource search to Google” deal that could get past antitrust scrutiny would make a big difference), and is a deteriorating asset. Microsoft was apparently ready to offer $35/share in December before Yahoo! blew Q4; it would still be a bargain at that price, and from Yahoo’s perspective it’s worth a try to get the price another 10%-20%.

    Michael Arrington at TechCrunch thinks that Microsoft wasn’t prepared for its stock to go down in response to the bid. That seems naive to me. It’s in both parties interest to stretch this out a little to give the time for the market to evaluate it. If both Microsoft’s and Yahoo!s stock start to climb — that is, Microsoft’s stock recovers to its pre-offer range of $32-$34, that will be a very positive sign for the deal.

    The more I reflect on this deal the more I think that if it goes through, it’s a great one from Microsoft’s perspective. Popfly + Yahoo Pipes, together again for the first time, in a platform-agnostic way! Yahoo! Answers + Microsoft Research’s natural langage technologies! The Danger acquisition (Sidekick + Zune?) introducing another interesting synergies! Well done.

    PS: Mashups in the news! Popfly in the Times!

    Reply
  8. Liminal states » Blog Archive » Yahoo!!!! (was Yahoo!?!?!): Why, after further reflection, I think Microsoft’s offer for Yahoo! is a brilliant strategic move

    […] been several weeks since Microsoft’s unsolicited offer for Yahoo. My initial reaction was that while high-risk, it’s a good deal for Microsoft. Since then, on further reflection […]

    Reply

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