All Things Digital

The lack of announcement by Microsoft this morning, as expected, has Silicon Alley Insider speculating that Microsoft (MSFT) and Yahoo (YHOO) are finally engaged in serious, behind-the-scenes discussions about finally coming to the table and making a deal in the long-running takeover battle.

From Henry Blodget’s blog to Steve Ballmer’s brain…

But it’s not a bad theory, especially given the eerie quiet after the spate of very public Hamlet act by the Microsoft CEO yesterday. After telling The Wall Street Journal, “With the right circumstances it’ll happen. Without the right circumstances it won’t happen” today, this is how the New York Post characterized it:

“The frequently shouting, often sweaty Ballmer gave no indication as to the direction he was leaning, saying only that there were three paths the company could pursue: a friendly deal, an unfriendly deal or walking away.”

Well, that clears it up! (Not even one little bit.)

Actually, BoomTown posted earlier this week about informal talks already taking place:

According to sources close to both companies, there are informal discussions now taking place between Yahoo and Microsoft–via bankers, board members, shareholders and others close to both companies–to try to prevent a hostile takeover scenario or the sudden withdrawal of Microsoft’s offer.

So given Ballmer’s range of options this week seem wide enough to drive a semi through, perhaps that’s precisely what Yahoo is finally doing today, as its board meets, sources tell me, to discuss options.

Having successfully gotten the price talk up around the mid-$30s, after it was heading downward only last week and ladling on more Google (GOOG) scariness aimed at Microsoft yesterday–Fabulous online ad outsourcing deal coming! We swear! Google has magic powers to put a spell on you! Boooooo!–the bluffing by Yahoo CEO Jerry Yang would make the famous poker player Jerry Yang proud. (Both pictured here.)

So now, we wait and watch to see who wins this seemingly endless game of Silicon Valley Hold ‘Em.

Memo to Yahoo from Microsoft: We will begin bombing in 30 minutes!

Whether it is love-bombing or the other kind, it’s still a mystery to BoomTown.

But, according to sources close to Microsoft (MSFT), as early as today, sometime after the market closes, might be when it renders its decision on the next step in its Yahoo (YHOO) takeover battle.

Unless it changes its mind, of course, and decides tomorrow. Or Saturday.

It depends on your definition of imminent. Microsoft’s seems to be a little flexible.

Good lord, the suspense is killing us. Well, not really, as once this decision is made, there will be another and then another and then another.

It’s like the Democratic presidential race, except there’s no Reverend Wright to liven up the proceedings.

But sources close to the company said Microsoft CEO Steve Ballmer first wanted to ping the board and also Microsoft employees to gauge sentiment, which he did yesterday and today.

At the town hall meeting, which BoomTown reported was taking place today with less-than-enthusiastic support for the Yahoo deal from Microsoft troops, Silicon Alley Insider managed to call into the meeting and got this Ballmer quote:

“We’re interested to pay for it at some level and beyond that level we’re not willing to pay for it. I know exactly what I think Yahoo is worth and I won’t go a dime above.”

His options: Walk away for a little bit. Walk away permanently. Raise the price. Lower the price. Hold pat and initiate a proxy fight, releasing a slate of alternate directors.

That or solve its vexing problem in the online ad business by buying Google! Hey, it could happen! OK, not so much.

In all seriousness, BoomTown prediction: Walk away for a little bit. It’s the most dastardly thing to do, possibly tanking Yahoo’s stock and showing who is in charge. Second choice: Proxy fight.

We’d like see a slight price rise, to $33 a share, which would be hard for Yahoo to refuse and a 48-hour deadline to start negotiations. It would seem fair and urgent and give Yahoo little room to maneuver.

But it is hard to see how Ballmer will be able to overcome his obviously impatient nature and reward Yahoo for its recalcitrant behavior.

In any case, time will tell. Or not!

So what prompted TechCrunch Editor Michael Arrington to pen a pugnacious piece on how blogs should not be raising so much venture capital and instead roll themselves into a “Dream Team,” with the unusual title of “More Bloggers Raising Money. Here Comes Politics. And Here Comes My Rant” yesterday?

Well, besides garnering Arrington a big dollop of traffic and attention, which is perhaps one of the blog entrepreneur’s most impressive talents, could it have something to do with the fact that he’s been busy recently talking to several well-known tech blogs about joining a roll-up organized by TechCrunch itself?

Or that he has told several people I spoke to that TechCrunch was considering doing this by raising as much as $15 million, giving it a $35 million valuation?

Reached by email last night, the voluble Arrington declined to comment.

Thus, a BoomTown translation of his TechCrunch piece is Job No. 1!

Arrington wrote: More blogs are raising venture capital, we’re hearing from people they’ve pitched. Newcomer Silicon Alley Insider is looking for a $3 million to $5 million round, if reports are correct. And paidContent is pitching for a second round in that same range (paidContent raised a round of “less than $1 million” in 2006). We’re also hearing that paidContent is trying to sell the company for $15 million or more, and just bail out with some spending money.

Translation: If that scalawag Henry Blodget thinks he can steal even an iota of my thunder, he better get ready to rumble. And while it is entirely incorrect that paidContent is selling itself or raising that much money, I love the smell of napalm in the morning and FUD in the blogosphere!

[BoomTown actually contacted paidContent’s founder, Rafat Ali, who strongly reiterated that the site might raise a very small amount of money, nowhere close to $3 million to $5 million, and was not trying to sell the company at all.]

Arrington wrote: These rumored deals come as funding for bloggers is heating up in general. Just a month ago VentureBeat reported a $320,000 raise. In 2007 we saw Sugar Inc. ($10 million), GigaOm ($1 million), Xconomy, Blogher ($3.5 million) and The Huffington Post ($10 million) raise venture capital. That’s at least $25 million in 2007 invested in blogs and blog networks.

As far as we know, no significant investments were made in blogs in 2005. Weblogs, Inc. raised around $300,000 in 2004, but before they got around to spending it they had sold themselves to AOL (TWX) for an estimated $25 million. The investors, including Mark Cuban, received 15x on their initial investment.

Translation: And if that elfin Jason Calacanis can score, where’s MY payoff!?! I mean, I am the Jason Calacanis of Web 2.0, aren’t I!? The Mac Daddy of the widget economy! The Sultan of Zing! And did Calacanis ever have the chutzpah to pose for a picture lighting cigars with a handful of crisp, flaming Benjamins! I think not!

Arrington wrote: But apart from that first 2004 investment in Weblogs, Inc., there haven’t been any sales or liquidity events to suggest these investments will be a success. And back then blogging was a cakewalk. Most bloggers linked to each other constantly in a state of brotherly or sisterly love. No one was making any money or getting much attention, so for the most part people got along (with notable exceptions like engadget/gizmodo, who play to win).

Translation: The rain may never fall till after sundown./By eight, the morning fog must disappear./In short, there’s simply not/A more congenial spot/For happily-ever-aftering than here/In Camelot.

Arrington wrote: Those salad days are long gone. Writers suddenly want to be paid market wages, far above the $5 per post that they received two years ago. No, we’re talking a big salary, with benefits, and stock options. There went half your margins at least.

Translation: Wages?! Big salary!? Benefits!? Stock options!!!??? Half your margins!!? Who do these people think they are? The Web 2.0 shooting stars I write about incessantly in TechCrunch?

Arrington wrote: And writing good content is only half the battle. You have to figure out the complex, dynamic web of politics between bloggers and mainstream media before you post to know where to get support. And you’ll need support in the form of links from other prominent bloggers. An early push can take a post and make it a headline on TechMeme, which leads to page views and notice by sponsors. But since blogging is almost by definition a conversation between bloggers, fights tend to break out over emotional issues. Cliques develop. Can you count on them to support you down the road?

Translation: TechCrunch is from Mars, Valleywag is from Venus.

Arrington wrote: Personally, I’ve found that if a fight is necessary, fight clean and fight hard. Make it as bloody as possible and end it fast, with no loose ends dangling about. Leave no lingering emotional stone unturned. When everyone gets up and dusts themselves off, the issue should have been resolved one way or the other, and both sides should be happy to shake hands and tango another day, even if the handshaking is done privately. Those that aren’t capable of doing that tend to push themselves to the outskirts of the blogosphere, where their main job is to lob in attacks at random intervals, pursuing long-forgotten insults.

Translation: Bloody tango? Ouch. Ew. Yuk. And handshakes after that seems unhygienic. But let’s solider on. Aha! Another Broadway musical clue! The Jets are gonna have their day/Tonight/The Jets are gonna have their way/Tonight/The Puerto Ricans grumble/”Fair fight”/But if they start a rumble/We’ll rumble ‘em right.

Arrington wrote: So today, at best, I’d describe the blogosphere as a frontier town with no lawman (I mean, O’Reilly has a badge on, but no gun and no jail). You can do just about anything you want, but the politically savvy folks tend to arm themselves to the teeth and gang together to protect their property. Everyone else is in the middle of chaos, either fighting blindly for attention or politely asking (by linking early and linking often) if they can join the big Gang.

Translation: Wait, now the metaphor has shifted to the Old West? OK, we can keep up: Anything you can do, I can do better./I can do anything better than you./No, you can’t./Yes, I can./No, you can’t./Yes, I can./No, you can’t./Yes, I can, Yes, I can!

Arrington wrote: And now that the big guys in the Gang are being injected with capital, hiring tens of employees and expanding their businesses, they suddenly have a lot more to lose. Linking is never done just because. Rather, links are your political capital that must be expended appropriately. Don’t link at the right time and in two weeks when you’re pushing your own headline, you’ll wish you had. When you stop seeing other blogs as people you admire and want to discuss things with, and start to see them as your competitor, your brain shifts and you stop linking the way you had previously.

Translation: Hey, how did we get to Washington, D.C. and the inside of Sen. Hillary Clinton’s cerebral cortex in the midst of yet another compromised political calculation? It’s like we’re on “Fantastic Voyage”!

Arrington: Luckily, the newbie bloggers are there to fill in the links when they’re needed. That’s why, if you are a mid-level blogger, you are likely courted by the bigger blogs looking to get your support. If you know what’s going on and are willing to play the game, you can see your blog rise very, very quickly. Choose the wrong blog, though, and you may find yourself alone and lonely in your forgotten blog.

As an aside, when I see a young but promising blogger, I’ll start linking to him or her constantly to build them up (others, like Winer, Scoble, Jarvis and Rubel did that for me). The goal is to help move them up to a position of influence as quickly as possible. The more non-crazy influencers in the game, the easier it is to ignore the noise generators and the better the overall conversation becomes. Over the last year, for example, Silicon Alley Insider, CenterNetworks, LouisGray and Mathew Ingram I’ve been pushing hard. These guys rarely agree with me, but when they talk I listen because they’ve put some thought into what they are saying and how they are saying it. Those guys haven’t hit the big politics yet, and tend to link out a lot to everyone. They are a very important part of the ecosystem–pushing their link votes toward stories they find interesting and helping those other bloggers get headlines and maintain their place in the Gang.

Translation: Next stop, the stylings of Mr. Michael Corleone! There are many things my father taught me here in this room. He taught me: keep your friends close, but your enemies closer.

Arrington wrote: So what’s the point of this rant? Well, all this money flowing into the blogosphere is disrupting the complicated and emotional, but also stable way things are done. Bloggers with money and employees and health care programs and boards of directors and shareholders have to play politics with a whole new group of people, splitting them away from what they do best–Fighting the Blog War. Their behavior can become erratic as they have to decide to tone down their writing to get a certain type of sponsor on board, which in turn lets them make payroll. Investors want to see growth, so more and more blogs are launched, but perhaps without the right talent to grow it into a long-term business.

If a VC hands you a check, their intention is not to hang around for 20 years while you build a nice lifestyle business for yourself. What they want to see is an exit, preferably a 10x or higher exit, within 3 to 4 years. But something tells me that few of these networks are going to be able to grow quite as easily as they think and reach those liquidity events. The talent is, increasingly, locked up. Even when new talent is discovered or trained, every niche has serious heavyweights already there with page views and advertising dollars to back them up for a long fight.

Translation: Finally, the point! Which is: Assimilate or Die!

Arrington wrote: At some point it’s going to become painfully obvious that the only way to get to a massive valuation is for the top talent to band together in a company where they each have an equity stake and therefore a reason to work all night on that next great story. They’ll each have their own space to stretch their legs and let their personality run around a little. Someone needs to pony up a big round of financing around an existing blog, or perhaps a new entity, and then start rolling them up into a big fat CNET-crushing $200 million/year in revenue business.

Translation: This is my sneaky but clever way of floating a trial balloon of an effort I am already trying to organize. The existing blog? Mine! The new entity? Run by me! The $200 million a year? Mine, again! Now, enough about me–what do you think of me?

Arrington wrote: It can happen. In fact it’s almost certainly going to happen. But if you bloggers go out there and raise $3 million to $5 million on say a $10 million valuation, you’ve just priced yourself out of the roll-up. That option will be closed to you, and you’ll be stuck out in the cold, taking life-support payments from Federated Media or another ad network, and having a generally awful time running your business.

Translation: Luca Brasi sleeps with the fishes.

Arrington wrote: What I’d like to see, and even be a part of, is the blogger equivalent to the 1992 U.S. Men’s Basketball Dream Team. That team could take CNET apart in a year, hire the best of the survivors there, and then move on to bigger prey.

Translation: After we are done bloody-tangoing with Neil Ashe at CNET (CNET), Owen Thomas and his evil overlord Nick Denton better sleep with one eye open.

Arrington wrote: Just the thought of being a part of something like that has held us back from raising any outside capital at all. I believe we have the beginning of a team that can play a role in this new Dream Team.

So think twice before taking that venture money, guys. You may be shutting more doors of opportunity than you realize.

Translation: By saying we have held back from raising any outside capital at all, what I really mean to say is that I am going to do it.

Resistance is futile.

BoomTown is suffering from Rupert Murdoch déjà vu.

Back in July, I actually wrote a post about the head of News Corp. (owner of Dow Jones and this site) in which the first sentence was: “MySpace and Yahoo should merge.”

I was referencing a very interesting comment that Murdoch (pictured here) made in an interview in June of 2007 with Time’s Eric Pooley.

In it, he floated the idea of trading a 25% stake of Yahoo for MySpace.

As the Time article noted:

MySpace’s much smaller archrival, Facebook, is surging: what started as a narrower college site is broadening and accelerating. … But as MySpace showed signs of reaching saturation, Murdoch began very preliminary, exploratory talks about trading the site for 25% or more of Yahoo. ‘Terry Semel was enthusiastic about it,’ he says of the then Yahoo CEO. ‘We were looking to see if it was a good idea. I wasn’t sure.’ Now Semel is gone, and Murdoch needs to see what Yahoo will become under its new boss, co-founder Jerry Yang.”

And as I noted in my post:

In one fell swoop, Murdoch had confirmed the talks, but made it seem as if it was Yahoo’s execs who were desperate to do a deal (and you know Semel and Yang would never talk about how they felt about it), while also giving MySpace an instant valuation of $8 billion at today’s nearly $32 billion Yahoo valuation…

It is no small leap to imagine the sly Murdoch calculating that he should be thinking right about now about getting while the getting is good and the hype is at an all-time high.”

Well, nothing much seems to have changed with the news yesterday that News Corp. was interested in grabbing just under 20% stake in Yahoo in exchange for MySpace and News Corp.’s other online properties in its Fox Interactive Media group.

(The discussions were first reported on the blogs Silicon Alley Insider and TechCrunch.)

This is an unusual switcheroo, since, on Feb. 4, Murdoch had publicly said it was unlikely News Corp. would vie for Yahoo. “We are definitely not going to make a bid on Yahoo,” said Murdoch on a conference call with analysts.

It depends on your definition of “definitely” and “a bid for Yahoo,” I guess. Classic rope-a-dope that even Muhammad Ali would admire!

This time the idea is reportedly to value MySpace at $10 billion (which is actually $5 billion less than the $15 billion that Microsoft’s recent $240 million investment gave smaller MySpace rival Facebook).

Of course, such a Yahoo mash-up with News Corp. would likely be a hopelessly complex deal, especially compared to the cleaner and simpler giant-pile-of-cash-and-stock that Microsoft is offering that big shareholders are likely to prefer.

“The only one who would understand such a complicated News Corp./Yahoo tie-up is Murdoch,” said one large Yahoo investor. “It is too much to figure out and not enough clarity compared to Microsoft’s bid.”

In any case, according to The Wall Street Journal, Yahoo CEO Yang supped with Murdoch and News Corp.’s President Peter Chernin last week to talk about the idea.

Presumably, the thinking is the same as I noted more than six months ago:

To merge his massively popular social network with Yahoo’s still-powerful-despite-struggles ad and search empire would create a powerful media and technology giant that would have a lot of key elements for the next generation of Web interaction.

For Yahoo, which is in need of a dramatic move, this would deliver a smack to Google (which still has reportedly not completely closed its $900 million ad deal with MySpace), solve its inability to enter the social-networking space and boost its distribution network dramatically.

For MySpace, Murdoch gets to unload a service that is increasingly going to need a major dose of technology expertise and own a big chunk of what could be a drastically undervalued property.”

The more things change…

Please see this disclosure related to me and Google.

I guess someday Microsoft will finally get around to buying Yahoo–as it has been doing, based on various reports, for the last few years now (talk about due diligence!).

But not today.

That has not stopped the speculation from flying all over the place–mostly due, I think, to the fact that no one can exactly figure out what either party is going to do to get its game on again in the Web space.

Thus, a merger! Of course!

Read more »

Please see this disclosure related to me and Google.

Good god, Google at $2,000 a share?

Oh, it’s just that Web sprite Henry Blodget (pictured here), at it again, over at his blog on his site Silicon Alley Insider.

The former Wall Street analyst enjoyed brief fame in the last Internet mania for predicting that Amazon stock would go to $400 a share (and it did–but not for long!). Then later, he got investigated for touting stocks publicly that he disdained privately and, thus, was barred from the securities industry for life.

Yesterday, the can’t-help-himself Blodget wrote a much-noticed post arguing that the search giant’s stock could go nuclear.

Wrote Blodget:

Remember a couple years back when some analyst floated the idea that Google could eventually be worth $2,000 a share–and was ridiculed from coast to coast? Well, first it’s worth noting that Google is now almost a third of the way there. Second, it’s worth noting that $2,000 a share would mean a market cap of about $750 billion, which–given a reasonable time horizon–just isn’t that far-fetched.”

Um, Henry, it is far-fetched, as to be borderline fanciful. So, please stop taking all those cold medicines that make you all fuzzy-headed, because your theory even makes Facebook at $15 billion seem reasonable.

Given my obvious link to Google (see my disclosure here again, if you did not click at the top), it might surprise you that I think the current price for Google–zeroing in on $600 a share–is moderately insane.

But it’s fueled by the fact that there is not a whole lot out there to invest in if you want to be in the Internet market. Yahoo? Maybe after that 100 days is up. eBay? Skyped! Microsoft? Zzzz. Amazon? Still, in the end, a retailer.

Thus, search behemoth Google, which keeps gobbling up share right in the middle of the boom in the search-ad business, wins the beauty pageant and the faux diamond tiara.

For now. While Google is a real star in its core business (and what a business it is–it’s like having the water franchise in the Mojave desert), there are a lot of obvious issues the company will be facing as it moves forward.

Not today maybe, but three or four years hence–and the seeds of trouble are already planted.

You could go on about the lack of stunning success in its diversification efforts–admirable as some of them are. You could wonder, whither YouTube? You could worry about that DoubleClick deal getting slowed down or even stopped by the government.

You could focus on too-high development and employee costs. A downturn in the economy and the ad market is a recessionary nightmare all around and especially for Google. And did we mention the potential power of social networking?

Or that Google founders Larry Page and Sergey Brin might soon have to return to the alien planet from whence they came, taking with them those big-brained, bike-riding, solar-power-generating Googlers and leaving all us small-brains to flail around once again on the Web?

But while we can all have a good long giggle at Henry’s cheek, I think I have to side solidly with TechCrunch’s Michael Arrington on this issue (and, those who follow stupid tech blogging insider stuff, you know it’s not my first or even second impulse).

Except for the too-aggressive suggestion that someone “muzzle” Blodget, Arrington (pictured here in a disturbingly Blodgety pose) wrote a passionate and most excellent post on Blodget’s latest prediction.

He is entirely right that even if Blodget was not being serious, such outlandish statements are not helpful.

Writes Arrington persuasively:

Henry Blodget made his name by predicting outlandish price increases for Internet stocks in the late nineties. A lot of people lost a lot of money (or, all their money) by listening to his recommendations. The government charged him with securities fraud in 2003 and he was subsequently banned from the securities industry for life.

“But Blodget is a bit of a one-trick pony, and he likes to stay in the headlines. So he continues to build cases for big valuations of Internet companies. The only difference is he publishes these thoughts on his blogs. And people still listen to what he has to say.

“He isn’t always bullish (he’s recently trashed Yahoo and eBay). But he can’t seem to contain his regular predictive outbursts that such-and-such stock is worth massively more than it is now.

“When he’s talking about Facebook being worth $6 billion to $20 billion that’s OK, because it isn’t a public stock and no one is going to go out and throw away their life savings. But when he builds a case for Google’s stock to go to $2,000/share, he’s crossing a line.”

I agree wholeheartedly.

And, admirably, Arrington also points out criticism he himself gets for being “overly optimistic about young start-ups.”

He is, but he’s right that it does not matter nearly as much–who really cares that much if another venture capitalist doesn’t get his gold-plated wings–as much as those companies in the public market where regular people can lose hard-earned money trusting faulty advice.

I was always offended back in the last dot-com frenzy, when Wall Street analysts were giddily recommending stocks in companies they knew full well were not up to snuff and then walking away with bags of money from mutant initial public offerings they engineered.

The press, including myself at times, were bad enough by not being as tough as we should have been, but the double-dealing and “friends-of” stock roundelays were indeed sickening to watch.

At one point, in a story I tell a lot, when an investment banker said to me that he was about to take a company that was “pre-revenue” public, I asked if perhaps it wasn’t easier just to go mug some old lady on the street and grab the money in her purse to speed things along.

This should not happen again. This new round of Internet innovation–and, yes, bubble–has much more significant and useful and terrific companies in it and many deserve to grow in a healthy environment.

And there’s already enough hype without writers like Blodget piling on, especially since he is (and always was) such an excellent and convincing writer.

It wasn’t always thus for Blodget in regards to Google, by the way. He was a bear on it as recently as January 2006, as reported by Digital Daily’s John Paczkowski, back when he was writing for “Good Morning Silicon Valley.”

So let’s return to that little oasis of sanity and not wallow in mania and heedless speculation.

In the name of safety of old ladies everywhere (and I am veering in on that demographic all too soon), we all can do better than that.