kivanmaharaj.com

Good day Everyone,

 I am currently on holiday in Amsterdam and Europe so I will posting as and when I get some time. It is very cold here , except for today wich is a hot day. 

It would seem that Microsoft is sticking to their guns with their bid and refusing to raise the offer anywhere close to what Yahoo is looking towards. If we look at Microsoft’s share price ,it has actually taken a dip which realistically brings the offer from 44 to 41 billion dollars. We know of couse that Jerry Yang does not want to sell out to Microsoft, as he definitely has an emotional attachment to the company he co-created. It is like giving your kid up for adoption and while you have visitation rights you cannot take the kid home. The harsh reality here is that the Yahoo has many parents also known as shareholders who need to see some sort of long term positive turn around strategy plan coming from the Yahoo board. Their only other option would be to take Microsoft’s offer and call it a day.

Obviously we all know that Yahoo is courting many other companies like News Corp to assist it ,but that is not a long term plan just a save me Microsoft one. Short term great , but in the long term this could be the downfall of Yahoo anyway.

Bill Gates has stated he will not be looking to raise the bid any further, which I think means if you don’t take this offer now there will be no other. The other plan would be for Microsoft to aquire shares slowly and then make an offer for the outstanding share capital. But what I do know is Microsoft will never be able to organically grow their online business as they are already so far behind that no amount of money could change that. They need a Yahoo type of company to bring them into the game and help them with the growth part of the business they lack.

So what are the alternatives hsould they strick out with Yahoo,

1. Aquire more small high growth companies that  could boost thier presence

2. Organically grow their online business by competing head on with Google ,Yahoo and every man and his dog

3. Accept defeat and see where the road thakes them (Obviously not Microsoft’s style)

4. Focus on their core business and forget about the Interent (When hell freezes over)

5. Buyout Facebook for $15 billion and turn it into a web platform

It is difficult to say but I would go with number 1 or 5 as options to not getting Yahoo as a division in your company. 

It would seem that after Yahoo set the bar higher Microsoft is looking at going at a more aggressive strategy to aquire Yahoo. I think for Microsoft it is more a case of catching up in the web world and Yahoo is the ideal way to do that, even though it is an expensive way to do so.

The aggressive way is what Microsoft is used to so they could probably work though the larger investors to get the approval they need. Unfortunately this makes Jerry Yangs job all the more difficult as he hold about $1 billion of stock and he would have to work hard to convince fellow shareholders that Yahoo holds more value as a seperate entity then being part of Microsoft.

If I was Yang I would’nt sell as Yahoo holds alot of untapped value which can be seen if they position themselves in the consumer areas that always grows despite what the markets say.

Heres a thought - What are the basics for consumers

Food

Travel

Sport

Housing

Money

Entertainment

So lets take each one of these and break them down into more focused areas and develop applications focused around them. Use the consumer to build the applications, see what they want and how they want it. Focus groups of radom individuals would be a great start. Go back to the basics and work from there.

The company also needs to generating more profits in order to boost that flagging share price which needs a kick. How would we do that ? Their new ad system is good but they need to look beyond that. Mobile applications is going to bring a new wave of opportunities. I think Yahoo should really put significant effort in this but focus on emerging economies where there is huge growth potential.

An example of this would be South African based mobile provider MTN which took a risky strategy of going into Nigeria. This proved to be very profitable for the company and propelled them throughout Africa and the Middle East.

Yahoo needs to start taking more risks and become more agile if they want to combat a takeover.

The Yahoo AOL strategy is not going to be any better for them. In the long run Yahoo as an entity on its own will work better for itself.

Well looks Microsoft is on buying spree as reported they have purchased Danger for a figure of around $500 million.

More of the story on venturebeat

Software giant Microsoft reportedly spent $500 million to acquire Danger, the company that developed software to power the youngster-popular Sidekick.

The figure, while not officially announced, was dug up in reporting by GigaOm’s Om Malik. We haven’t confirmed that exact figure, but we do have enough info that suggests investors made a very good return.

The acquisition comes after Danger swallowed some $225 million from investors, Om says, though I think that some of that may have been debt because we’ve been told the equity investment was less than that. The company’s chief executive Hank Nothhaft was insisting yesterday that the outcome was a “very, very strong exit” for its backers, and it probably was. The company’s valuation crept up steadily from 2000 from about $27 million to $190 million last year, according to our source. So investors pumping in money at these levels all appear to have done well, even the earliest ones who had their money locked up for eight years (we mentioned the investors in our story yesterday; Mobius, though, was the earliest backer).

More interestingly, however, is Om’s thought on why Microsoft is making the move — it wants to “pull an Xbox” on its mobile phone business. Not only does it want to extend beyond the business world and entice consumers, it also wants to use Danger’s software-as-a-service technology to offer “Microsoft Services” such as search, mail and instant messaging on the Danger platform, using it to compete with Google Android.

Like Om, we believe Microsoft should open up Danger’s platform in a more radical effort to make it attractive to developers. In the mobile world, it still has a lot less to lose than it does with an open strategy in the desktop software business, and in fact, it’s probably the only way it will win at this stage.

Its great to see a viral built company being sold for a good sum of money. According to reports it is rumored to be around $20 million ,which is a tidy sum of money in anyones back pocket.

It would be good to see what James Hong will do with his share of that money.  

As everyone knows cash is king and during times of recession cash becomes king ,queen and the whole army. Most businesses usually keep reserves for just this type of period ,but what how would a startup do this as it does not have the cash reserves in place as yet and needs a constant flow of cash.

The most obvious would be to raise as much as possible and hope that you don’t crash and burn before the recession ends. Even though the advertising business is growing in the web world it is also becoming more tricky to make huge amounts of cash without being clever in how you present the advert to your customer base.

Many of the current hot web 2.0 startups are raising cash. I have taken this from venturebeat.com , you can read the rest of the article there.

Take widget-maker Slide, for example. The company hired well-connected investment bank Allen & Co. in December and rushed to raise $50 million at a $550 million valuation. Its executives flew out to New York right before Christmas to seal the deal with its private-equity backers, as Keith Rabois, Slide’s vice president of business development, tells me. They didn’t want to wait until the economy got worse (and pocketbooks thinner) in January.

Perhaps the biggest thriller here is Glam, the online media and ad network for women, which boldly planned to raise $200 million in equity and debt in August, but which it has yet to close. Things are clearly taking longer than expected, although the company says it has an announcement coming soon.

Here’s some data. Out of 379 IT-related funding rounds that happened in the fourth quarter of 2007, 129 were for web companies, according to Dow Jones VentureSource. From total of $3.7 billion in investments, nearly $1.1 billion went to these web companies. “It’s pretty impressive for that little [industry] segment”, Dow Jones’ Adam Wade tells me, noting that there have been more than 300 rounds raised already in January, a good portion of which have been web deals.

For more data points on the latest funding, take a look at the social networks. Facebook raised $240 million from Microsoft last October, then raised another $60 million from Hong Kong billionaire Li Ka-Shing in November, and an undisclosed amount from European entrepreneurs the Samwer brothers in January. Hi5, as well, just raised another $15 million in venture debt on top of a $20 million round last summer. Meanwhile, Bebo hired a bank last fall, and I hear it is looking both at selling and raising more money.

Seeing that I am busy with my startup, I am going to try to bootstrap it for as long as possible. I think VC funding will definitely slow down and VC’s will become more picky on what they want to invest in.

There is a ton of hype around web 2.0 and its consumer orientation but what about web 3.0 I have read 2 very interesting articles around what web 3.0 should be about and there is a recurring them that it is more focused around centralization and personalization. What this really means is that all your information will be floating around you profile and marketing will be targeted towards your likings. A bit like Project Beacon from Facebook but less intrusive and impersonal.

I think this is where the semantic web comes into play as that is where we are slowly moving to. I am sure as I write this all the major and minor search engines are busy at work trying to bring this concept to the consumer market. If we look around the web we will see some of this web 3.0 animal like ad targeting from the likes of Yahoo and Google and Facebook.

My issue here is how does privacy come into play with this. Do we just give all our information to a site and then get nailed with marketing from corporations or will it be a case of I like red fast cars with V8 engines and based on that get targeted by the likes of GM and BMW. It will be interesting to see how this will work. I think Yahoo has a great opportunity here as they tons of user information at their disposal.

I have read two interesting articles on web 3.0 and if you are interested please click on the links below

http://www.readwriteweb.com/archives/web_30_is_it_about_personalization.php

http://www.readwriteweb.com/archives/web_30_4cpvs.php

So lets says Microsoft puts the cash down and Yahoo agrees to the offer. The next step would be to integrate the products in order to have one cohesive look and feel. This is obviously going to be an issue as there some areas that both compete head on. Which one would Microsoft take the more open standard Yahoo way or their own. My guess goes with them taking their own way as that is the Microsoft way. So alot of products from Yahoo would be dropped like maps for example , messenger and those users would be migrated to Microsoft’s platforms.

This could have a disastrous impact for the Yahoo user base and maybe a boon for Google. Open Standards I believe work the best on the net. An open developer community always produces more innovation then a closed system with tons of rules and regulations.

From a branding point of view which brand do you work with as you possibly cannot run both at the same time. So will Yahoo slowly be migrated to an MSN brand ?  Or will it say a Microsoft company under the Yahoo logo.

this is very difficult as I think both companies will not want to alienate any of the user base as that could equate to millions fo dollars of lost revenue should you get a mass migration of users. But from an advertisers and business point of view one wuld have to make a decision on what the strategy of the new entity would be. You cannot run both companies independantly as that would be a waste of resources.

Would we also see further job losses at Yahoo ? Most definitely as Microsoft would be looking to cut costs and move towards their calculated ROI.

Should this deal go though and products begin to change we should probably expect to see alot of new startups competing in the those spaces.

So we are all interested in hearing about what Yahoo is going to do with the $42 billion offer on the table. I think many are speculating that Yahoo will take the offer and call it a day. Will this be good for competition and the free market ? I think not. Why you may ask is because of the following,

1. We will in essence have only 2 choices for advertising Microsoft and Google.

2. Microsoft will definitely try to stomp out smaller competitors first using teh Yahoo platform

3. Users will at some point be migrated to a Microsoft standard and that will be a step back for opensource

4. Openess and Innovation go out of the window (and into MS Windows)

5. All of Yahoo’s smaller business units like Flickr will loose that look and feel and will become a profit tool that we don’t want.

All of this is very bad for startups even if they don’t see it now , they will see it later.

The counter aguement is that people will just migrate to other services and all startups to grow and compete including the ad companies. This is not an incorrect statement but the percentage that will migrate will be a small portion of users as most of us don’t want to go and recreate accounts and move tons of mail and messenger contacts to another servce.

 From the advertising side why would’nt Microsoft give the entire userbase deep discounts for a few months and essentially bring the samller competitors to their knees.

It is scary to think about it ,but this could be the reality.

Maybe Google to intervene with a bid as they don’t have a strong presence in many areas that Yahoo is king. Another way would be if Google bought shares in Yahoo more towards 40 percent region.

Well let us wait and see what the coming weeks will bring to the table.