When we conducted our own analysis of the shareholders that owned both MSFT and YHOO, we concluded that ultimately, they would be in favor of a higher YHOO.
Some said “not so” - because major institutional investors would lose out more on their MSFT stake than they stood to make on their YHOO shares.
How short-sighted. Today Valleywag comments:
At Capital Research & Management, an investment management firm and longtime Yahoo shareholder, media-savvy stockpicker Gordon Crawford has raised its stake in the company to more than 16 percent, from $4 billion to $6 billion at current prices, some time in the past three months. The stock’s chart strongly suggests that his buy came after Microsoft’s bid sent Yahoo shares soaring. What that means: Crawford believes Microsoft will succeed in its bid for Yahoo, but only after raising its price. That’s a fair turnabout from his earlier concerns that a higher price for Yahoo would mean losses from his firm’s stake in Microsoft that outweighed gains from its Yahoo position. Capital’s huge bet on Yahoo means that CEO Steve Ballmer’s hand is weakened in resisting calls to up Microsoft’s offer.
I am not sure on that conclusion at the end, however.
What I reiterate is the following, alone:
- MSFT will remain in a rut, trading between $30-40 and not beating the market over time (ie. it might go above $40 but the rate of return relative the market will be inferior).
- YHOO will remain a poor man’s stock as Google continues to outgrow it.
But combined, MSFT/YHOO/AQNT/etc. becomes a $400B machine. This is why a savvy media investor such as Gordon Crawford would double his stake in YHOO. In other words, yes, MSFT could very well end up paying a bit more for YHOO, but it’s not because they have to, it’s because it’s best for all parties to consummate this deal and focus on business… which is something that becomes impossible in deal purgatory.
Note: Long YHOO. Used to think this deal would get done at $50B, but with YHOO’s missteps, I now figure it might be at $44.6B - $50B, closer to $45B. We shall see.
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WatchMojo NewsletterMore pontifications on Yahoo!’s handling of the M&A opportunity, here, in an interview I did with SNL Financial. Hmm… note to self: don’t use the word crazy in an interview.Mind you, the way this is unfolding is indeed crazy. Rupert Murdoch’s move was bold and brash… and I think it highlights the fact that Murdoch believes that MSFT will ultimately prevail, so why bother siding with AOL or someone else who will simply lose, only to risk raising the ire of Redmond.
It’s worth noting that News Corp.’s FOX Sports was brought to life when former FOX Interactive Media CEO Ross Levinsohn struck a partnership between FOX Sports (which he was running at the time) and MSN.com. This propelled FOXSports.com into a respectable position alongside ESPN and SI. If you think about it: if indeed MSN ends up being folded into Yahoo! then FOX Sports has a shot of living alongside Yahoo! Sports which is a huge property.
Bear in mind that from FOXSports.com, News Corp. can promote anything he wants within his sprawling FIM empire: be it MySpace, MySpace TV, AmericanIdol.com, IGN, RottenTomatoes, etc. By at least lining up alongside MSFT, he is leaving that option open and can basically strengthen FIM’s place as the leading digital media playpen amongst traditional media companies’ online strategies.
Mr. Murdoch has proven his shrewdness by upping the bid enough to acquire MySpace in 2005, but this stroke could be even more genius because over time, Yahoo! and Fox Interactive Media remain a viable merger option which would allow him to fully realize the gains he stands to make on this $580M bet on social networking giant MySpace, which is the largest social networking site in the world.
Disclaimer: I own YHOO shares, WatchMojo has a partnership with MySpace TV, I used to work for News Corp. Mr. Murdoch and I are golfing buddies. All right, that last part is not true. We go fly-fishing.
First off, that entire “Do no Evil” line is PR, nothing more, nothing less. All companies are inherently good and evil, when there is something in it for them. That being said, which company is acting unethically here:
Let’s see the context: after doing a search, when I scroll over the result, I notice that Google and MSFT handle search results differently.
On the right, in Internet Explorer, when you conduct a search, you can copy shortcut the link and paste it as such:
In other words, you get the URL of the underlying website in the search result.
However, on the left, in Mozilla Firefox, when you conduct a search, when you copy shortcut the link and paste it, it comes out as such:
In other words, unlike MSFT, Google clearly “inserts” itself in the mix there. If I were to do that and send it someone, the user would click through and be redirected to the underlying site via Google.
Technically, Google gets both a) credit for the click and b) data on who is clicking on what.
Is that evil? Nope. It does not really change much. It surely is smart… but should MSFT do that, too… or should Google not do that at all? Technically, maybe/probably MSFT does that and shelters its redirect URL… but the difference is that Google’s modus operandi there is less user-friendly. If I want to copy and paste a link to someone, I have to click through to the site, copy it, and then paste it onwards. With IE, I need not do those extra steps.
Or is this much ado about nothing and I need to get back to work?
Thoughts?
If I were a MSFT exec I’d lose my mind seeing this:
That’s right: you open up Microsoft Outlook and what do you get when you search for something?
Google Desktop Search. I’m not saying that buying Yahoo! would help Redmond on that front per se… but the mere fact that Google is making inroads in MSFT’s backyard is enough for Steve Ballmer to eat a chair.
IAC is venturing into the How To space with the launch of Life333.com.
I try to be nice to big media companies but I can’t lie through my teeth, either. This smacks of lack of planning and thinking here folks.
The How To space is very, very crowded. Just look at some of the companies vying in this space:
This does not even include About.com, which is getting more and more into video (mind you, we have more videos than them… but who’s counting), but that’s the thing: IAC’s Life333.com is actually blending video with text… which is even more backwards because the text-based How To train has long left the station.
Second, the Life333.com domain name seems too close to comfort to Life33.com, which seems to be an Asian adult site (did anyone bother to type that in?)
Frankly, I think IAC looks bad here. The only thing I can think of is that this leak that they’re launching AsianPornSite.com - I mean Life333.com - is a negotiating play against one of the startups in the field… maybe IAC tried to buy one of them but the asking price was too high… so they countered with “really, we won’t buy, we’ll build”… an Asian Porn Site! Ok, scratch that last part.
But then again, not even taking the time to realize one missing number takes you to an Asian porn site makes me think that Mr. Diller should stick to buying and should leave the building to… well, gee, I guess few media companies are all that good at building startups… unless, of course, you’re into the Asian-porn kind of startup variety… and let’s face it: who isn’t?
Over the past two years, not a week went by where you didn’t see a video platform raise money. The result was a mini-bubble: countless players all vied to compete with YouTube’s utter dominance in the space but largely failed to gain any traction. This week, Vidavee was dumped by investors for $6.6M after raising over $8M, some peg that figure at about $12M.
Well, this year it’s the mobile video platforms that are getting all of the attention, and frankly, I am not sure why. This is not a knock at any one single competitor in the space: I could not even tell you what makes one different from another.
What I do know is that this is not that big of a market, and the market isn’t all that lucrative, either. Let’s break down the market and see why:
1. Not Monetizable
All this social media hype and myth is based on the premise that it should all be underwritten by marketers’ advertising money, and frankly, I am not sure live video is all that monetizable. The quality is way too low and the risk factor is way too high. That mix is not something advertisers want. Thankfully, we’re not alone in our bleak view of this segment.
2. Extremely Niche
A lot of the valuations and rationale (using that loosely) is based on the burgeoning size of online video, but streaming oneself to the Web, and doing so live, is ridiculously small compared to the broader entertainment and informational space. In fact, some of the competitors concede that much, sort of.
3. Reach is Ridiculously Low
Why none of these companies stand a chance, frankly, is that any one who would be interested in such a service will be drawn to YouTube. If I want to stream my sorry ass online for the world to see, I won’t want to reach 10, 100, or 1,000… I will want to reach 1M people. Even YouTube cannot do that for me, let alone these wannabes.
Maybe one player will create value… but that will leave a lot of carcasses, too. However, at the valuations they are raising said money, they’re cornering themselves from the get-go by pouring money into the business before they have a business model down.
- This is the #1 financial reason why VC-backed companies fail: investing oodles of VC money before having a proven model.
- The #1 operational reason why VC-backed companies fail? They don’t have much advertising sales experience.
UStream.tv raised $11.1M Series A. Series A? You have to be kidding me! That is setting yourself up for a Series B down round… and all of that on top of a $2M angel round.
To note, this came on the heels of Qik getting $2M investment. Thanks to the greater fool theory, this $11.1M Series A will basically lead someone to step in and invest $30M into one of the many other clones:
You doubt that?
4. No Leverage in M&A Talks
Consider how Veoh, Video Egg, Metacafe, Daily Motion et al. all raised $20-40M with nary an exit in sight. Those sites all have created value, too… but their market is saturated and none of them really have any traction or leverage in any M&A talk. Let’s look at that table:
I don’t understand why investors would back a company when there is so much competition, but hey, maybe that’s why I am on this side of the table.
PLAY
