Update: Part 3: Maybe I was wrong - Where was THIS Jerry from 1995 to 2008?
MSFT reacted to YHOO/GOOG’s partnership.
Forget what the analysts and reporters will say, here’s how executives read today’s move by Yahoo! to let Google run ads alongside 3% of its search results.
- After investing billions in Panama, Google is now admitting that it can never catch up Google. We’re not talking about catching up Google’s in terms of market share, we’re talking monetization.
- This does in fact reduce its value to MSFT. This actually gives MSFT a reason to really threaten to lower its bid.
- In search, data is everything. The EU just said that search companies must purge data after 6 months. If such a measure would ever pass, then the advantage that data miners such as Google have would be reduced. In other words, Google’s advantage - and share premium - relative to Yahoo! would fall.
- This is a not-so-tacit admission that Q1 was not so hot… and given that YHOO’s most senior brass has little Street cred left, I presume this will be the promise they try to push to investors when they announce Q1 results.
- Yet by opening up its kimono to Google in April 2008 as Microsoft is about to acquire Yahoo! means that Google will get a lot of data on Yahoo!, which in turn gives Google a far greater premium on Yahoo! than they did beforehand.
- Yahoo! should have done this deal by getting some kind of right over Google’s display business. I know this is dreaming… but Google would welcome some expertise on this front… and while I doubt it would have ever happened, any self-respecting dealmaker on Yahoo!’s side would have asked for this. This, in fact, could make YHOO’s shareholders consider remaining neutral and independent, though any alliance with search king Google makes Yahoo! less independent.
- Most importantly, YHOO is worth less relative to GOOG in MSFT’s eyes. In 2005, I was VP of Ad Sales for the largest men’s lifestyle publisher. Our bigger peer in the broader men’s publication space (one focused on video games and not lifestyle) wanted to buy us. As talks persisted, they eventually asked us open up our kimono for them to audit and confirm our traffic etc. But by doing so, they got all of the information in the world and inbound and outbound traffic and where users spent time etc. After that month, they got access on our business’ sweet spot. They could have acted in bad faith and used that info to invest and compete with us. The point is: Google will now use that 3% of YHOO’s inventory to get all of the data in the world on YHOO…
- This is a key, key issue: Microsoft could in fact make a direct tender to YHOO shareholders and say “if GOOG’s deal with YHOO goes forward, our offer drops by $1.” That is “only” $1.2B in the purchase price, but symbolically investors will fear it enough to pressure YHOO.
- Finally, MSFT is showing up on YHOO’s doorsteps viewing itself like a knight in shining armor… who just got pooped on by YHOO. Sooner or later, they’ll shove the carrot where the sun don’t shine and hit YHOO with a stick.
This might have been the tipping point.
Note: Long YHOO… Part 3: Maybe I was wrong - Where was THIS Jerry from 1995 to 2008?
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