There’s a battle going on in the technology world over Yahoo, the search and advertising company. Microsoft wants to buy it, and Google wants to sign deals with it. Microsoft has so far failed in buying the company, but Google has inked a deal with Yahoo this morning, which means Google will supply Yahoo with some search ads.Yahoo is very positive about the deal, of course, and expects the deal to raise revenue by USD 800 million during its first year, and an increase in incremental operating cash flow by USD 250 to USD 450 million. In addition, the deal covers making the two companies’ IM services interoperable. Yahoo CEO Jerry Yang: “We see this as a good, open, flexible deal and [one that] helps Yahoo be strengthened as a good longer-term competitor.”
Sue Decker, Yahoo President, added:
This agreement provides a source of funds to both deliver financial value to stockholders from search monetization and to invest in our broader strategy to transform display advertising and advance our starting-point objectives with users. It enhances competition by promoting our ability to compete in the marketplace where we are especially well-positioned: in the convergence of search and display.
In the meantime, Microsoft draws the shortest straw. In a statement released yesterday, Yahoo stated the talks with Microsoft have ended, and that nor a complete acquisition, nor a smaller partnership came out of them. “Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested,” the statement reads, “With respect to an acquisition of Yahoo!’s search business alone that Microsoft had proposed, Yahoo!’s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company’s view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.”
Obviously, Microsoft isn’t exactly happy with the Yahoo-Google deal. Microsoft spokesman Jack Evans explains:
Our position has been clear since April that any deal between these two companies will increase prices for advertisers and start to consolidate more than 90 percent of the search advertising market in Google’s hands. Legal and industry experts agree that this would clearly make the market less competitive.
Now, where did we hear that 90% figure before? Anyway, the deal with Google is non-exclusive, and as such, the future may still hold a partnership between Microsoft and Yahoo. For now, however, the victory goes to Google.
in somewhat related news, there has been a sharp increase in CFO (Chair Flying Object) reports in Redmond.
“Chair-like Flying Objects” seems to have a catchier ring to it. I mean, it’s not very unknown, mysterious and therefore interesting if you *know* they’re chairs flying. But “chair-like” has that nicer out-of-this-world feel to it. It could be a chair being thrown straight out of Ballmer’s office… but is it? Could it be a bird? A plane? Some totally unknown object that just happens to look like a chair?
Unless it has a big Windows logo imprinted on the back, we’ll never know…
haha yeah smashing all their windows no doubt with these chair-like flying objects
It’s in decline. Both Microsoft and Google know this. But neither wants the other to own it.
What this deal means is that Google is inexorably inching toward anti-trust regulation in the online advertising marketplace. It will take some time, of course, but it’s going to happen.
What would make Anti-Trust issues rise is if Google were in a bidding war for Yahoo, against Microsoft and won out, with Federal approval.
Google has close to 80% of the online advertising market. It’s already teetering on the brink of anti-trust regulation. It’s doing everything that it can to consolidate the market through acquisition (eg. Double-Click, etc) and drive out competitors. I predict that, within the next 3-5 years, Google will hit a wall, will want to continue gobbling up other companies, and the regulators are going to step in. It’s just a matter of time.
Seems that lots of folk aren’t very impressed with this deal.
For example:
http://www.marketwatch.com/news/story/yahoo-sinks-deeper-options-dw…
“But many analysts were skeptical about what some saw as a desperate move that merely confirmed Yahoo’s increasingly weak position, and which nearly everyone agreed will face stiff regulatory scrutiny.
Analyst Jeetil Patel of Deutsche Bank called Yahoo’s deal with Google “perhaps one of the worst strategic maneuvers seen in the Internet industry.”
“Net-net, we don’t understand this deal,” Patel told clients in a research note.
It also reinforced the view of critics that Yahoo’s board had lost control of the ship, clinging to whatever alternatives it could find.
“Yahoo’s board was forced to extract value some other way, and the result was a commercial ad deal with Google announced,” analyst Mark May of Needham & Co. told clients in a research note. “This deal diminishes Yahoo’s relevance among advertisers and strengthens the hand of a key competitor … could face regulatory headwinds, and there is uncertainty that the target financial gains can be recognized.”
May downgraded Yahoo to hold from buy. “
If Microsoft really wanted to galvanize the market, they could announce a voluntary break-up. The result would be a group of companies much more nimble at responding to the market and listening to what users really want.
In addition, those who think that, for example, Microsoft Office is doomed or that Microsoft’s internet strategy is flawed, would be given an exit. Investors could cash in their stock, or keep stock in the OS part of a new group but decline to buy stock in the Office or online parts of it.
Just my 2 cents, but this would have a much, much bigger impact than anything Microsoft could do in its attempts to out-Google Google. On the other hand, this would also spell the end for Senor Ballmer and his mates, which means it will probably never happen unless imposed by Wall Street.
I’m no market analyst and was born pretty dumb, but from what I’m reading, it seems like it’s a:-
Google-1, Microsoft-0
Sounds good to me!…for the moment… but the evil empire may still try something dirty, though.
Edited 2008-06-14 17:31 UTC
Whine whine whine