For a while there, HipMojo.com had turned into the non-stop, 24/7 home of MSFT/YHOO merger news.
It’s now been a few days since any YHOO/MSFT posts… and we’re not alone in getting angsty. Is a deal about to happen? Well, some say that in last week’s SEC filing, Yahoo! hinted that the white flag was about to come out.
While I am sure that MSFT will eventually walk away with Yahoo!, I’m not sure if Yahoo!’s CEO Jerry Yang gets that, yet. Then again, it has been a few days since any moves of stupidity, so maybe this is really the silence before the final storm that beleaguered Yahoo! shareholders have been waiting for. Generally speaking though, the writing’s been on the wall.
According to most analysts polled last week, this was a fait accompli:
* Twenty-seven of 28 financial analysts responding to poll expect Microsoft will succeed in buying Yahoo
* Twelve analysts expect Microsoft to stand by its initial offer price of $31 per share in an equal mix of cash and stock
* Four analysts expect Microsoft to keep offer at $31 per share but make all-cash offer, effectively raising deal value
* Twelve analysts expect Microsoft to raise price to between $31.50 and $35 per share
Truth is, Redmond can afford to pay up:
Even if the Redmond, Washington-based company depletes its cash reserves for Yahoo, Microsoft can easily rebuild its bank account. The company generated $17.8 billion in cash in its fiscal year that ended in June 2007. The company has spent $54 billion in the last two fiscal years on share buybacks and dividends. This comes on the heels of a one-time, $32 billion dividend to investors in 2004.
Over the last five years, Microsoft stock has risen 12 percent versus a 55 percent increase on the S&P 500.
“Microsoft has tried buy-backs and dividends and none of that has done anything for the stock, so it might as well try a big acquisition,” said Brendan Barnicle, Microsoft analyst at Pacific Crest Securities.
While I initially thought the deal would move up from $44.6B to $50B (or about $35.90 per share), I now think that MSFT might eventually be able to land YHOO by merely raising the deal to an all-cash, effective $31/share. I am not saying there is no chance that the deal gets derailed, nor am I saying that there is no chance that the deal gets done for higher than $32… I just think that the probability of a $31/share buyout is highest, and higher than it was a few weeks ago.
Disclaimer: Long - albeit lighter - on YHOO…
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WatchMojo NewsletterI am surprised no one’s thought of this before: a site for How to videos!
Yes, that is sarcasm.
Last week I was going to comment on Mindbites’ raising $1M to take on a cornucopia of competitors… but I didn’t. Frankly, I think New Tee Vee’s Liz Gannes was being too kind in her post, maybe it’s because their VC True Ventures led the round in Mindbites. Not sure if that is why, but Liz has been more critical of the 5th, 6th and 7th contestant in the space than the 12th player Mindbites… and I wondered why. But I digress. Gannes is a fine reporter and it’s not like she projected a YouTube-esque success for Mindbites, so we let it slide.
Today, I learn that one more player - Spongefish - has raised $2M for, sit down, you guessed it: how to videos. Spongefish is joining Mindbites, Howcast, Howvids, 5Min, ExpertVillage, eHow and Video Jug in the space.
I’ve covered the intricacies of how to video sites here, especially in the context of UGC videos and frankly, this reinforces my argument for why so many VC funded companies fail: they do not really get advertising.
Don’t get me wrong: I want every company in online video to grow because that will make the online video segment take in more money from online advertising in specific and marketing in general, but How To’s will remain as difficult to monetize as UGC and lifestreaming content, for that matter, which is another segment of online video that is growing bubbalicious.
The folks at New Tee Vee, Venture Beat and Paid Content all remain surprised by the sheer number of How To projects being funded here, and I think I can explain why:
Most financing deals take 3-12 months to materialize… so maybe, just maybe, after the first wave of UGC video sites faced challenges in monetization, a bunch of MBAs gathered around a coffee shop and said “How To Videos” - that’s the sweet spot. So they all hatched business plans around a UGC How To Video site with subtle nuances… and before long, they all hit Sand Hill Road. All of these deals are being announced recently, but perhaps, they had been in the pipeline for months (when none of them were really announced). If all that remained for the deals to close was crossing t’s and dotting i’s then I can imagine why the investors didn’t feel that it was worth it to kill the deal, since so much of the reluctance to invest lies in due diligence and meetings, and not the actual wiring of funds.
Frankly, if that’s not the reason, I am speechless. Why? Some of these companies are already shuffling their cards. How so?
I won’t name who, but I found it odd that one of these sites was pushing to become a destination itself, but then found them promoting themselves on YouTube. I know, as I’ve said: YouTube is both a promotional and commercial platform, but if the business plan you sold to investors called for you to take on YouTube in the How To niche but then you turn around and put your library on YouTube, then you won’t be much of a destination. Can you imagine a social networking site aspiring to become the next MySpace or Facebook advertising or promoting themselves on MySpace or Facebook?
Remember, these services don’t produce content, they’re platforms. For a platform to win, you have to be #1 or at the very worst, #2. Bear in mind, if we WatchMojo.com put our hundreds of How To Videos (out of thousands) on YouTube, HowVids, HowCast, etc., then there is nothing all that original about any one of those services insofar that they are not differentiated by content. To win: they need traffic. VideoJug does produce content, and it’s armed with $40M in funding.
So if your goal is to be a platform but you are using YouTube yourself to build awareness, streams etc., then Houston, we have a problem.
If I am reading this incorrectly, please enlighten me… but this is more “ain’t got a clue” management and investing if you ask me.
But, I digress. Anyway, we’re updating our Online Video Funding Amount Chart: see the bubble form in Live Streaming (selfstream) and How To Videos… as I press publish.
Upon hearing that Electronic Arts CFO Warren Jenson is leaving to pursue other interests, you have to wonder: does this have anything to do with the ongoing Take Two takeover bid? Probably. Maybe the Board or CEO pushed him out because it’s taking too long, maybe it was not handled efficiently. Who knows. But it got me thinking: how impatient some people can be when money is at stake.
This past weekend, I was doing a Q1 2008 recap and realized that things have really grown a lot in one quarter. WatchMojo.com launched its syndication network officially in Summer 2007.
- From Q3 2007 to Q4 2007, our quarterly streams grew 791%.
- From Q4 2007 to Q1 2008, our quarterly streams have grown 828% (as of March 24 2008).
Each month, our streams have grown:
- July to August, 2007: 47%
- August to September, 2007: 64%
- September to October, 2007: 30%
- October to November, 2007: 28%
- November to December, 2007: 16%
- December 2007 to January 2008: 8%
- January to Februar, 2008: 16%
- February to March, 2008: 101%
This begs the question: we were growing each month, but for a few months, our growth rate slowed down. During that period: would that have forced a VC to push me out and replace me? Maybe.
We grew over 100% this past month… what if next month we grow by 50% “only” or 5%, or gasp, what if we shrink for a month or two? Is my ass on the line, then?
Don’t get me wrong, we are busting our butt trying to get more distribution deals and more syndication partnershis… but what if for a month of two growth is not constant and in an upwards fashion? Is that a pardonable crime? I have no clue.
VCs are known to be fickle and impatient… would they step in and demand uninterrupted, constant growth? Probably not every month… but what is the threshold? You hear so many companies ask CEOs or founders to leave… sometimes it’s because the growth rate is stalling, sometimes it has nothing to do with the company… but the point remains: if the EA acquisition of TTWO did not go through, CFO Jenson left. If company growth slows down, particularly a startup’s, does the CEO get replaced?
I have no idea what the answer to this question is, nor do I want to paint all VCs with the same brush, but I do wonder what the answer to this question is.
Justin.tv was a first mover in the latest bubble in the online video space: streaming yourself to the Web, a service that has quickly become a commoditized black hole for investors to flush their money down the toilet.
The company is bragging about how after one year they have 57 years of programming on their site [UPDATE: I spoke too soon, apparently, a lot of the content are illegal Arabic-league soccer games… WTF].
Rightfully, that is a lot of content and if I were Justin.tv, I would stress it, too. To put things into context: after 2 years of producing content, WatchMojo.com has produced hundreds of hours of programming. So granted, 57 years is a helluva lot of content. But that being said, at the risk of sounding like Dick Cheney, all I can say is: so what?
That stat captures the state of online video: plenty of crap, very little quality. If you want to imagine how advertisers are reacting to this milestone, think of Bruce Springsteen’s tune “57 Channels and Nothing On’”.
Pardon my bearishness on the category, but this is just more content that advertisers don’t want, and one more area where investors won’t see a return on their money. I don’t care who says what: advertisers have shun UGC, they’ll shun this type of content even more.
Having content is one thing, the next question is: will people watch it?
“Justin.tv is building a destination site for broadcasting and watching live video online while chatting with friends. The company’s mission is to enable viewers and broadcasters to interact and exchange ideas in real time through chat and live video.”
Justin.tv - and their ilk - are not only competing to become a destination (which is very challenging), but so far they are having a challenge getting people to return (the orange part doesn’t look too sizable, if you ask me, percentage wise… when you consider how sticky their mission should make them out to be):
The bigger problem is that YouTube can crush all of these companies with a nudge, because people with something to say will want as wide of an audience as they can reach… and said audience is on YouTube. What made me laugh was that one of Justin.tv’s competitors is building its audience on YouTube. Hmm… that sounds like defeat before the warning bells go off, if you ask me.
I won’t name which one, but the point is, these business plans are pretty hollow, but it sure is easy to emphasize a meaningless stat to suggest everything is hunky dory. Can you imagine a social networking site aspiring to become the next MySpace or Facebook advertising or promoting themselves on MySpace or Facebook?
Ad networks don’t make publishers real money, they make ad networks money. I have worked with every single ad network in the universe and ultimately, ESPN’s decision to not work with ad networks is in fact pretty wise. First off, in my days as VP of Ad Sales, I pleaded with my penny-pinching President to yank all ad networks… he loved those extra few dollars they brought… even though they only generated 10% of our revenue despite having 50-75% of our ad inventory.
For that reason, ESPN’s decision to yank the ad networks is tactical but the fact ESP’s parent Disney is trying to get other publishers to scale back their use of ad networks boils down to the fact that as ad networks build their reach across audiences and high-quality web sites, then there is a risk that advertisers eventually bypass many of the publishers and work directly with ad networks. This won’t happen: marketers will continue to go directly to portals, large social networks and top tier publishers… but ESPN’s worry is not hollow, either.
Net-net: smart move by ESPN. They probably generate 80-95% of their revenue from direct deals and ad networks don’t really add much revenue, and with the leftover, unsold inventory, they can promote other Disney products and services or partnerships.
PLAY
