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."

Comments

Web advertising

[BadAnalogyGuy]

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.

Re:Web advertising

[weave]

I bought my car in October based on a banner ad. It was an ad for a car named Honda Fit that I had never heard of before. I wanted a small car that had a decent amount of hauling capacity. So I clicked the ad, read the blurb, then went about doing a lot of other digging about the car, joined a Yahoo group for the Fit, etc, etc.

Re:Web advertising

[AtariDatacenter]

I wrote a longish reply about this (below). Sure, there is a component of this that is to augment microsoft's web based advertising. No question.

What is really the motivation for this transaction is that Microsoft got caught with its pants down in an emerging field. Again.

A new Internet is developing. (No, really. Hear this one out.) An Internet that is centered around your location (your GPS coordinates) and where you currently are, and what is around you. If the Internet, to date, brought you access to the world, then the next generation of Internet services will bring you access to your community (or will bring your community access to YOU!)

Think of all your data, all your requests, everything, but tagged with GPS coordinates. What fun services can you provide? GPS + Flickr = location and time based picture sharing. Went to a concert? Easily get photos from other people who attended the same event. See? Internet + GPS = fun.

Guess what also can be location based? Yup. Advertising. I won't get into the whole host of ideas here (online coupons, business search with advertising, favored search results, etc etc) but there is a great opportunity here. If people are currently using the Internet to market to the nation/world, then perhaps a different group of people will want to use the Internet to advertise to people in their own community.

For example, a mom-and-pop sandwich shop. Trying to find a good sub shop to go to for lunch? The mom-and-pop business can pay for favored search results. Perhaps dangle a digital coupon to entice your business. A completely different advertising customer and advertising model than we have today.

Microsoft totally has its pants down on the local Internet that is developing behind the scenes. Microsoft will be handing out the money all over the place to build the empire that they neglected to develop themselves. One that Google is totally dominating.... and it isn't even out there to the public... yet.

Freedom a la Microsoft

[shanen]

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.

Optimal strategy for Microsoft now

[Animats]

• Wait for Icahn to get a majority on the board.
• Cut a deal with Icahn for the parts of Yahoo they want.
• Let Icahn find buyers for the rest of the assets.
• Profit!

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.

Re:How's this going to work??

[cp.tar]

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.