The Inevitable Endgame for Yahoo
Sure, there might be a giant scramble among media and tech giants over the next few weeks to grab Yahoo, now that Microsoft has finally pulled the trigger on its longtime desire to buy the troubled Internet company.
But, as BoomTown and everyone else has written, another weak quarter, a continued muddled outlook, perpetually confused management goals and the dipping of Yahoo stock below $20 a share have finally added up to the tipping point that Microsoft had long been waiting for.
To say this could have been prevented is moot now–Yahoo CEO Jerry Yang and his execs have managed the company right into the arms of the software giant.
In other words, they have been just lackluster enough over the last six months of managing Yahoo’s “revival” to push the company into a now-uncontrollable situation it finds itself in.
And with it’s I-shall-have-it bid for the troubled Internet giant, Microsoft has made a bold, slightly insane lunge to ensure that it is not sidelined in war with Google to control the Internet.
You have to guess the phones were ringing at Google HQ this morning, as other companies–from News Corp. to eBay to Comcast–are trying to figure out how to make a competing bid to the $31-per-share offer Microsoft lobbed today.
The obvious scenario: That Google would guarantee billions of dollars of revenues from search monetization for another company, so it could enter the race to grab one of the most trafficked sites on the Web.
Ironically, Google is the obvious company capable of bidding against Microsoft in this war and the only one which cannot, because of their dominant share of the search market and the justified concerns of monopoly.
And Microsoft, proving its ability to make dramatic moves in its own efforts to remain relevant on the Web by overpaying for a stake in Facebook, has stepped right into the fray by trying to take control of one of the Web’s once mighty and most important independent companies.
And while it’s never over until it’s over, let me just say, for Yahoo, it’s over.
Please see this disclosure related to me and Google.
Comments
During all your critical articles recently on Yang and Yahoo, I don’t recall you touting this buyout as likely. Seems you missed the boat on a huge story, at least from an investor point of view. A bit more homework and a bit less cutesy videos and other nonsense (enough with the Facebook tripe!) would serve you well.
Posted by tony wilson at February 1st, 2008 at 8:00 am@tony - keep it collegial man, we’ve all fallen for the siren song of the facebook story every now and then. Ms. K’s blog has so much perspective I thought she actually lived outside the valley this morning, I checked her blog first while the west was sleeping.
anyways,
I’m really interested to see if MS pulls this off. Their is the obvious benefit of getting those highly trafficked web properties and potentially search and ad delivery intelligence.
But Also MS has probably the largest glut of highly interactive electronic real estate in the world (think devices, and windows desktop widgets). They just need to line up the tubes correctly.
Posted by nima negahban at February 1st, 2008 at 8:34 amAs I write this post at the bottom of the page, I couldn’t, to save my life, tell you what any of the ads on this page are pushing. It’s just too easy to not pay attention to ads on the Internet, which is why companies like Yahoo are never going to generate the kind of ad dollars they’d like to using the current method. People buying ads – I imagine – browse the Internet, they must realize how easy it is to not pay attention to ads.
If Yahoo really wants to turn the ad revenue thing around, they need to start thinking more like TV networks and less like search engines.
They need to pay high traffic Web sites for exclusive rights to make them available only through an exclusive Yahoo portal, and with those rights post two to three 30-second ads, that can’t be skipped over, every time a computer visits.
Think about it, isn’t that what TV networks do with the NFL, NASCAR and other high viewer events? Buy exclusive rights and then sell ads. Works for them, it would work for Yahoo as well.
What if you could read the NYT, WSJ and LA Times only through the Yahoo portal? What if you could only view NASCAR.com, NFL.com, NBA.com (and all related teams) etc … only through the Yahoo portal? How much would a 30 second ad be worth there?
This would be good for surfers as well. Yahoo could keep it’s general search engine available for people who want 144,000 returns on a search, but exclusivity would make life easier for people searching for information from only legitimate Web sites.
Posted by Joe Franscella at February 1st, 2008 at 8:59 amDear Misguided Tony (who is definitely not cutesy):
I and many others have talked about the Microsoft interest in buying Yahoo if the stock dropped below $20.
I wrote many posts on this–though I thought it was a bad idea each time–about four times specifically discussing the Microsoft interest.
Here’s one from last July:
Simply put, if Yahoo did decide to sell to Microsoft, it would be the end, and not the beginning, for the company. Even if its name remains, Yahoos need only recall what happened to the company that gave it its first big opportunity on the Web by listing the Yahoo directory on its powerful site. The minute it was bought by AOL in 1998, Netscape effectively was finished, and today its influence is negligible. That’s a fate Yahoo must avoid.
And I and everyone else noted the problems got worse last week, in fact, on Tuesday after earnings, when I wrote:
After the underwhelming call, which came after the markets had closed, Yahoo shares were off almost 10% in after-hours trading, falling below a dangerous $20 level to $18.89.
Or, as I like to call it, takeover territory.
And:
That lack of traction and not porky headcount is what has been depressing the stock, which remains in danger of slipping below $20 a share.
From there, things could quickly get out of control for Yahoo and perhaps spin it right into the hands of private equity wolves or others.
Posted by Kara Swisher at February 1st, 2008 at 10:58 amDid I read a post recently where KS said this definitely would not happen? Or was that another takeover rumor?. Just asking. I ain’t no cutesy…
Posted by chris rogers at February 1st, 2008 at 11:14 amSounds like Tony doesn’t get out much.
But Joe, I know this merger is of Biblical proportions, but get a grip man! I can’t tell if you are making a joke or really Steve Ballmer trying to explain it all to us.
This is the best tech news day in MONTHS!
Some other things happened today that got totally buried. But that’s just as well, as the interplay between this and the news from Facebook and Google will be spectacular, even more so for not having made headlines.
Whooooeeee!
Posted by Mac Beach at February 1st, 2008 at 2:02 pmChris:
I said Yahoo did not want it to happen and had rebuffed overtures each time they were made previously. And when I was shooting down old rumors, I was referring to the rumor on that particular day (which was not true at that time), not about the possibility Microsoft might make a bid. I never said it would definitely not happen ever.
In fact, I said twice this week that after the shares went below $20 a share, Yahoo was in a dangerous situation and had put itself in the path of such a possibility.
See above.
Posted by Kara Swisher at February 1st, 2008 at 2:12 pmKara,
I searched my memory, then I searched your archives. If I may, Jan. 11th — the headline was something along the lines of Microhoo or Yabay, with a theme of “Deal or No Deal.” You unequivocally stated — No Deal, Howie. You proceeded to shoot down the rumor Microsoft was sniffing around, for the 43rd time, as the bored talk of investment bankers at lunch, etc.
To be fair, you didn’t say it would not happen, just that Yahoo wouldn’t be interested. You put more stock in the idea of a Yahoo-Ebay merger. Which could still happen in the days to come. Who knows? Not me. Like I said, I was just asking…
Posted by chris rogers at February 1st, 2008 at 5:33 pmChris:
I did knock it down at the time and several times PRECIOUSLY, because I knew (via reporting!) that Yahoo was rebuffing all such overtures. I did note that Microsoft kept publicly making statements of interest, but I shot down rumors (which appeared about 43 times over the last year), because of Yahoo’s lack of interest in pursuing talks.
Read the WSJ and NYT today and you will see, this is just what led Microsoft to go hostile. And Yahoo still is not interested and looking for other suitors, although it might have waited too long to act by now and Microsoft could win this long battle.
When I was noting eBay, I did so then because it was the kind of merger partner that Yahoo was more amenable to.
Again, Jerry Yang has LONG been opposed to any merger with Microsoft, which was true then and probably even more true now (though, as I said, he might have to bow to inevitability).
And, as I said above, many–including me–wrote that SOMETHING was going to happen when Yahoo stock dipped below $20 a share, as it did this week.
Posted by Kara Swisher at February 2nd, 2008 at 10:29 am