Yahoo! Shouldn't! Sell! To! Microsoft?
Divide and ad broker
Analysis As The New York Post's "Microsoft eyes search giant in proposed takeover" splash rapidly evaporated over the weekend, you couldn't help but muster some sympathy for the seemingly confused Yahoo!.
A quick recap: the tabloid's "scoop" on Friday sent Yahoo! stock into an unaccustomed rapid climb, until Reuters, Bloomberg and the Financial Times pissed on the story from an even greater height, and The Post swiftly followed up on Saturday with the flaccid sowhatism: "Sources said the talks with Microsoft are wide-ranging and include everything from an outright acquisition to the purchase of an equity stake to a joint venture setup." Which might as well read: "Sources said some big tech executives had lunch with some other big tech executives."
Depressingly for Yahoo!'s top brass, everyone had already decided bending over for the Beast of Redmond would be a good idea. Analysts queued up to waffle for cash about "synergies" and "critical mass" against Google. Some even chirped up with the classic catch-all, didn't-actually-but-I-told-you-so, jeer that the deal had been "only a matter of time".
The blame for their ovine eagerness to put Yahoo! on the block rested on the narrowing shoulders of its CEO Terry Semel, the firm's Hollywood Julius Caesar, who must fear the Ides of July, when he'll be due another earnings call. Prior to the last one, he'd gotten the rent-a-quotes a little over-excited about Panama, Yahoo!'s new advertising platform, by having the temerity to say he "couldn't be more pleased" with its progress. In the highly
speculative nuanced world of financial analysis, that was enough to convince Wall Street that Yahoo! was about to deliver a blockbuster. It didn't, and so got a roasting by the most Googly elements of the business and tech press, who'll happily trot out a thousand reasons why Yahoo! doesn't have the coloured balls to compete.
We spoke to Yahoo!'s European boss Glen Drury before the Microsoft shenanigans kicked off last week. He complained: "Everyone gives us a hard time about being spread too thin." And everyone may be right, but it's hard to overstate how much Yahoo! has staked on Panama.
Drury said: "No one would disagree with me that Google has done a better job matching their ads than we have, I think we're doing a better job than MSN is, but our new technology will move us up in terms of matching to exactly where we should be. For Joe Bloggs who's using Yahoo! web search it's not going to affect their experience. We'll be using data which we already collect to match the ads."
Panama is really just the front end of a whole series of staggered upgrades to Yahoo!'s ad-serving platform, some of which have already touched down Stateside and not delivered an instant cash bonanza. The end game for Panama is the slightly spooky prospect of the web knowing when you're at you're most suggestible.
If, say, you were thinking about buying a new car, Yahoo! reckons it will be able to detect from your search behavior how close you are to a purchase decision from the ramp up, and dish up an appropriate intensity of car ads to your browser, all at an appropriately inflated price to advertisers. The UK roll out begins in the next couple of weeks, and despite Semel's expectation management gaffe, the firm is happy to trumpet early success in the US. Drury said: "Interestingly, it's giving Google a push in the US because they've gone back and said they're going to redesign some transparency into their ads system because we've had such a positive response out of giving people visibility."
Yahoo! is chasing advertisers hard for sure, and is keen to build a wall between itself - the media internet - and Google - the technology internet. Drury said: "We're beginning to think about things in the way that grown up media thinks about things. Disney doesn't produce Lost because it's a cool show; Disney produces Lost because it attracts an audience of people that advertiser want to pitch to. We're thinking exactly along the same lines on the audience side."
Famously of course, Google's policy - at least in public - is to make jazzy products first, then worry about plastering them with ads later. It's an approach that excites its many fanboys and Microsoft doomsayers, but must gift Yahoo! some advantages if it picks the right products for its audience.
We wonder if maybe those clever analysts are wrong, and Microsoft and Yahoo! stand a better chance against the Google juggernaut apart. Could fighting a war on two fronts: against an improved Yahoo! advertising platform on one side, and a Microsoft refocused on improving its software on the other, be the thing to make the wheels wobble a little?
We're just asking is all.
Following an old media battle plan has at least meant Yahoo! has so far avoided the $1bn lawsuit seas being navigated by Google and its video clip dump YouTube, which are accused to profiting from their freewheeling approach to copyright. Drury jumped to The Internet's defence on this one, insisting, "It's not free. There's an enormous amount of expense in developing the right tools that make people want to use it. Our hosting costs for video are absolutely enormous. It is incumbent on us to make sure we monetize those places."
"People think these things are free and that Myspace and Bebo are operating their sites for altruistic reasons to allow me and my mates to chat. In fact, it's an enormous cost, and if you think about net neutrality, which they're talking about coming to the UK." Who are the mysterious they in this "debate"? Our recent report from Westminster Hall suggested the goblin would be stillborn in the UK, but Yahoo! is apparently still exercised by it. Drury said: "Maybe the ship has sailed, but it's what the government is thinking about, so maybe it hasn't."
Sub-Lawnmower Man philosophical meanderings aside, Yahoo! has had a more damaging controversy to ride in the last year, since its Chinese arm bowed to government demands for user data which landed dissidents in jail. Since it conjured a company line on the controversy, Yahoo! has maintained the same public stance as Google: the choice is not whether to comply with the Chinese government, but whether to operate in the country. It's an implicit "don't worry, we want to make money out of China too", aimed at investors.
Here's a new one on us, however. Drury said: "These dissidents, the reason they're dissidents is because they want to make news. If they hadn't been caught doing something on Yahoo!, they would have been caught handing out leaflets, or something else. In some ways, being connected with the Yahoo! name gets them more press around the world than anything else they would have done. I think it's a bit disingenuous of the people who are saying that it's all Yahoo!'s fault and that we're complicit with those governments: it's absolutely not where we're going."
We were about to ask whether Wang Xianoning would have got 10 years if his audience had been limited to leafleting , when we were cut off by Yahoo!'s PR minders. Hey, at least it's not a multibillion dollar multinational pretending to do no evil. ®