April 16, 2008 | Wednesday
Microsoft, Rupert Murdoch, and the battle for Yahoo
By Jackie Danicki - Blogger in News |Search Engines |Google |Yahoo |Microsoft
The last couple of weeks have been tumultuous ones in the contest to see who will be awarded/saddled with Yahoo. A recap of events, after the jump.
- Two Saturdays ago, Microsoft CEO Steve Ballmer wrote a blunt, direct letter to the Yahoo board of directors threatening the company with a proxy battle - and a lower buy-out terms - if it did not start co-operating with Microsoft’s acquisition attempt. Ballmer accused Yahoo of hurting shareholders and employees by stalling, and lorded over the “generous” nature of the deal offered by Microsoft. The gist: If you know what’s good for you, you’ll start talking to us. The consensus from analysts: Microsoft erred badly by going hostile.
- The following Monday, Yahoo responded with its own letter, in which it called Ballmer’s threats “counterproductive and inconsistent with [his] stated objective of a friendly transaction”. The company also, in effect, called BS on Ballmer’s claim that Yahoo has refused even to talk to Microsoft. In the words of Yahoo CEO Jerry Yang and Chairman Roy Bostock:
Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit.
- In the same letter, Yahoo pointed to its announcement of new ad management platform AMP as proof that the company is fighting fit. But AMP is receiving a paltry amount of attention, as everyone is so hyper-focused on the Microsoft acquisition drama.
- The Wall Street Journal - no doubt briefed by Yahoo - reported that Yahoo and AOL are ready to close a deal which would combine the two media entities. If you think the Microsoft deal is something of a hard sell to the Yahoo camp, the prospect of an AOL merger is not going to be setting the world on fire for popularity.
- Yahoo announced directly that it will run a two week “limited test” of Google AdSense on Yahoo’s own search results. The trial is exclusive to the US and will be conducted on no more than 3 per cent of Yahoo search queries. It took precisely no time at all for a bipartisan coalition of Congressmen in Washington to jump all over this, saying that the Yahoo/Google test further underscore[s] the need for a hearing on the state of competition on the Internet and online advertising. This should be the easiest time Microsoft has ever had with regulators, as it is plain for all to see that Google is the dominant force in online advertising; the politicos (many of whom, irony of ironies, do not even know how to use a PC) will see that as reason enough to put the smack down on both Google and Yahoo for this stunt.
- Rupert Murdoch is always reliable for some good old-fashioned stirring, isn’t he? This holds true with the Microsoft/Yahoo saga, as News Corp has gone from (seemingly half-heartedly) trying to grab Yahoo for itself to backing Microsoft. Kara Swisher of All Things D puzzles over this development:
I am not entirely clear why Microsoft is also adding this level of complexity, even if it would give it a partner to add more money and assets to the deal. I get the addition of MySpace might be nice. And so would some investment dollars from News Corp. (NWS). And, most of all, I see how delicious it might be for Microsoft to be able to fire Google as News Corp.’s ad partner for MySpace (a firing, I suspect, Google might actually welcome, given its public complaints about the difficulty of monetizing social networking). But I am not sure why Microsoft won’t just man-up and fork over a few more dollars to its original offer, which would end this circus pretty quickly.
The best guess? It’s an ego thing: Ballmer doesn’t want to give Yahoo an inch or any sign that they may be worth a speck of dust more than designated in Microsoft’s original offer.
This whole situation has gotten fairly ugly, and I suspect there is a degenerative quality to the situation. Mike Arrington of TechCrunch concludes that a Microsoft-Yahoo partnership is the only viable option when it comes to challenging Google’s dominance. But as he puts it:
Yahoo has put costly severance plans in place to both retain employees and make themselves a less attractive acquisition candidate. But top talent has left anyway, and just about everyone at Yahoo seems to be looking for a job (even execs I’ve spoken with). Meanwhile, the Google deal shows they would rather give up the search marketing game, their biggest asset, than become part of Microsoft. Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.
If Yahoo “wins” this epic battle with Microsoft, will there be anything left at the end to celebrate over?
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