kivanmaharaj.com

There has been alot of talk recently with respect to Yahoo and why it did’nt take the money and run as well as why it is doing a deal with Google. Well Yahoo seems to feel that a deal with Google would be beneficial to the immediate bottom line. This is of course true but the long term effect will be the demise of Yahoo as a powerhouse on the internet.

I see the deal as a total score for Google as it has the upper hand in negotiations and can set terms for its benefit. I think that Yahoo should go it alone and restructure its engineering teams into smaller workgroups. Each workgroup should get assigned a product either new or existing to work on with a focus on total integration in mind.

The marketing and sales teams should change their current marketing strategy and focus on developing markets where they can gain ad revenue and push their product to the consumer.

What many don’t realise is that in reality Google is not the interent and most of the world does not use Google. The US market is the largest market for Google both in terms of revenue as well as search. That leaves the rest of the planet open to target.

A good example is Baidu.com which is king in China. Why you may ask ? Well they localise their product designed around consumer in that region. This should form a core part of the sales and marketing strategy. In essence, they should take it back to people. People actually decide who is king on the net. Create brand awareness and encourage developers to build on the Yahoo platform. Incentives are a great way to entice those developers.

In any business money talks and user expierence helps grow that revenue, so do sampling from the developing world and see what they like, what they want to see and how Yahoo can give it to them.

Like a good politician go to the masses and woo them. Take a page out of Obama’s workbook to see how it is done. Perception is 99% the battle won.

Well looks like Microsoft has come to its senses and decided that the best web strategy is the one where it goes it alone and via partnerships then by buying other web giants that will come with bagage. For the shareholders of Yahoo this will be a blow for those that wanted to cash out and look for other viable investments. They are now going to have chug along with Yahoo as the company tries to get to grips with its business and competing with the other giants.

I think Microsoft can as a long term strategy break into the web space and gain greater market share, but they have to rethink how they do things. The web is consumer based ,not like the current space they play in so they need to start really thinking like a consumer and not a corporate

For Yahoo I think a deal with Google is bad as in the long term it will be their demise. I see it the same as doing a deal with the devil and hoping not to get short changed later. Yeah Right. I hope Yahoo has not based their decision purely on the “Don’t be Evil” marketing ploy Google uses, although I have seen decisions made by large corporations based on less.

Well here is the transcript of the letter that Steve Ballmer sent to Jerry Yang

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

- First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

- Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

- In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

- This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

- It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

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. 

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. 

I was reading some interesting articles the other day on the most popular search engines and people have come to the conclusion that the search engine wars are over and Google has won the war.

I personally don’t think that this is true as, if we just have to think back a decade or so Yahoo was the king of the hill and from no where out pops Google and throws Yahoo out of the sandbox, which they are slowly getting back into now. The war of the search engines will not stop as there are many small competitors out in the market some of the engines are niche focusing on a specific area like travel.

I think that there will be a lot of focus on the niche search engines in the future as people don’t want to wade through 500 million results to get their information. They want it quick and precise. I know the likes of Google, Yahoo, MSN as working hard on bringing that experience to the user, but I think in the long run the more focused search engines will gain a lot of traction and a fair user base.

We might even see a real Google competitor pop out of the wood work one of these days and take on the mighty Google. It might even be fair to say that they could have an even cooler name then Google.

  I think that one of the main reasons Google became so popular was that it had 2 great features. One was the fast and relatively accurate results it delivered and the other was the cool name factor. The cool name factor was just as important as the service it delivered and I think if it was name for example thegreatestsearchengine.com or fastsearchengineresults.com it might have not grown so fast as the name would have stuck in peoples minds. This is important as it is the masses of people that make Google successful.

The cool name theory is an important one as that in itself could make or break a web business.

People should always remember that it is the faster fish that eats the slower one, not the bigger fish that eats the smaller. So I hope we will see a faster fish soon.