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Microsoft Circles Back to Yahoo With New Offer
Ian Lamont writes "Microsoft has come back to Yahoo with a new offer that would involve it buying part of Yahoo. No details have been released, but sources told the Wall Street Journal that part of the arrangement would involve Microsoft selling display ads next to Yahoo search results. No word yet on how this will impact Carl Icahn's proxy war with Yahoo's board."
Maybe I'm the only one missing the big picture, and in turn, the boat on web advertisements. I just don't get it anymore. It seems like such a waste of money to put up web ads when the average web user simply ignores them and the advanced users block them completely.
Media companies have grown huge on advertising, but they have also spent huge sums to produce and purchase programming that attracted viewers. Online content is nowhere nearly as expensive to produce, and the target web audience is much smaller than TV audiences. I just don't see how online advertising can carry a company much farther than they've already come.
I just don't get it. It seems like anyone trying to sell online advertising space is trying to squeeze pennies out of sheep. For all the effort going in to providing these online advertising spaces, I just can't imagine the payoff being that great.
Basically Microsoft is using their cash clout to destroy the value of other companies. If you don't sell out when they ask nicely, then they'll just make you a worse offer once the turmoil sets in. Microsoft figures they asked nicely, eh?
Other times when their nice asking was refused, Microsoft just created an approximately equivalent service or product and swallowed the losses until the original company was destroyed. I think Palm was probably the best example of that, though it's quite a stretch to call Windows Mobile even vaguely similar. (Actually, in that case they did most of the damage by using advertising to drive Palm away from their original objectives.)
I love freedom and democracy, and therefore I conclude I must hate Microsoft. Freedom is about informed choices among real options, not limited to choosing today's flavor of Microsoft's poisonous cruft. They should cut Microsoft into four or five pieces and force them to compete against each other and against Linux and Apple. That would give us real choices and lead to much faster development of much better software. It would also prevent any part of Microsoft from getting so fat as to go around destroying other companies and other markets, Yahoo and online advertising merely being the latest targets.
Freedom = (Meaningful - Coerced) Choice != (Speech | Beer^2), and sad sock puppets' bad mods avail them naught.
This makes more sense than buying the whole company, which is way overpriced and overstaffed for its revenue. All Microsoft really needs, after all, is the brand, so they can drive traffic to MSN.
I still expect a full acquisition to occur. Whether its $32, $33, or $34 or something else, we'll see...
I was just wondering... Yahoo's stock fell after Microsoft withdrew their original offer. Did it slide all the way back to pre-acquisition-attempt value or did it remain above that?
I knew immediately that Microsoft withdrew only to reduce Yahoo!'s value, but if Yahoo! decide to hold out again, the tactics may prove to be disadvantageous to Microsoft.
All in all, Microsoft is playing catch-up instead of innovating. Somehow, I think they will dominate the search market a year after Linux starts dominating the desktop market.
Ignore this signature. By order.
I agree.
My pet theory is that they are actually out to destroy competing application platforms, in this case LAMP(php) + YUI.
Who's going to lend MS $20bn to buy a Web company?
Who's going to lend them $20bn to buy an advertising company in a recession?
Icahn did absolute wonders for TWA when he bought them, and many other companies
/sarcasm
If Icahn gets control and Microsoft doesn't buy it all, expect Yahoo to be broken up into little pieces and sold off bit by bit if that's determined to be the most profitable thing for him. We may be seeing that happen now. Icahn gets a Board in there friendly to him, Yahoo only sells search to Microsoft, then starts selling off what's left to other companies.
I'd suspect if Microsoft buys all of it, I bet they absorb search and sell off the rest as well.
Yahoo! Is! Dead! and doesn't know it yet.
The proposed deal didn't make sense before, and it makes even less sense now. If Microsoft takes just search from yahoo, then the rest of Yahoo will be irrelevant within a year. Yahoo would be stupid to give up search.
The only way this can end well is if Microsoft just backs away and pretends that none of this ever happened.
There is just no getting around the fact that Yahoo is itself struggling to survive against google, and Microsoft has already pretty much admitted they can't compete with Google in search... I mean, didn't anyone ever tell Ballmer that two wrongs don't make a right?
I wrote paragraph after paragraph here, but nobody will read it. So let me condense:
This deal IS and always WAS about search. But not so much today's search. Tomorrow's search. Microsoft is playing for a market that exist... yet.
Online service are going to get a new focus, which is based on mobile computing and GPS. Your GPS coordinates will become a very valuable piece of data in numerous new online services, and will add flavor to existing services.
This will open the door to what I call the "local Internet" or the "location-based Internet". If the Internet to date has brought people access to the nation or the world, the local Internet will bring people greater information/access in their own communities.
Google is so far ahead of everyone else in this field, it is laughable. They've been playing the game well in advance of everyone else. Microsoft has almost nothing. Yahoo appears to be the second place player (and I'd argue a distant second).
Microsoft needs to play catch-up in the field that they, once again, recognized too late. Acquisition.
So, the deal may have the blanket of "search", but the desire behind it is more specific than that. They are looking to get their foot in the door of the NEXT generation of Internet services, specifically, Local Internet search.
I can think of two likely reasons:
1) Microsoft think that growth in the advertising market and the possible capture of market share from Google will be enough to provide a good return on the investment
2) Microsoft want to reduce the rents Google can collect from its dominant position in web search, thereby making Google less able to invest in products that challenge Microsoft's dominant positions in operating systems and applications
Technology firms that are successful in one market often seem to do things that look like 2) above. E.g. Novell had a very dominant position in network operating systems, and when Microsoft positioned NT Server for that market, Novell reacted by trying to offer a competitor to Microsoft Office, in order to reduce Microsoft's rents from its dominant position in the office suite market (thereby reducing its ability to invest in development of NT Server). Sun tried to do the same thing when threatened by Intel and AMD hardware running Windows, by buying StarOffice, and also tried to attack Windows in the OS market by pushing the 'Java platform' as an alternative.
Novell and Sun both failed abysmally to dent Microsoft's position in applications (and operating systems), and probably did more harm to themselves by wasting resources attacking Office (and Windows) instead of defending their positions (specifically, Novell took too long to realise it had to move from IPX to TCP/IP). The same thing could happen with a Microsoft attempt to use Yahoo to challenge Google, but in general I'd say Microsoft's management are a lot cleverer than Novell's or Sun's, and Microsoft have massively more resources. The thing is, Google's management are pretty clever too (Eric Schmidt may have failed at Novell, but it was more a case of not being able to stop the Titanic sinking after his predecessors had already run into the iceberg), and Google have a lot of resources as well.
In the best case, a ramping up of Microsoft's challenge to Google, and Google's to Microsoft, will lead to increased competitive pressure in both markets (which will reduce both firms' profits, but increase consumer surplus more than enough to compensate), but without a negative impact on the ability of either firm to invest in R&D.