Microsoft Seeks Partners For a New Run at Yahoo

Microsoft positioning itself for a new run for Yahoo Inc.'s search business, has approached other media companies in recent days about joining it in a deal that would effectively lead to Yahoo's breakup, say people familiar with the discussions. More>>

Jerry Yang's Investor Presentation

Here is the presentation Jerry Yang will make to shareholders on August 1, 2008. It was filed with the SEC today.

In it, Yang will make the case for:
1) Supporting the current board slate
2) Provides Details of Microsoft Discussions
3) Benefits of Google Agreement
4) Progress on Strategic Plan

View presentation >>

Yahoo Exploring Cloud Computing Service

Yahoo has formed a Cloud Computing & Data Infrastructure Group, to explore getting into the business of selling pay-as-you-go cloud infrastructure to developers and companies. Yahoo has been building massive scale infrastructure for years, but the intent of the new organization is to streamline development by bringing the various people and teams working on the core technologies into a single group, said Yahoo CTO Ari Balogh said to Dan Farber.

Below is the statement Yahoo issued.

In order to expand its cloud computing capabilities, the Company will form a Cloud Computing & Data Infrastructure Group, charged with developing a computing infrastructure that balances scalability with cost effectiveness. It will move all consumer-facing platform teams to the Audience Technology Group, led by Venkat Panchapakesan. In addition, it is putting new leadership in place behind Yahoo!'s search group, naming Prabhakar Raghavan to direct search strategy and Tuoc Luong as the interim leader of the search product team. Both Prabhakar and Tuoc will also continue in their roles as the leaders of Yahoo! Research and Search Engineering respectively. In addition, David Ku will lead the Advertising Technology Group within Search.

Russian Search Giant Coming To America

Russian search engine Yandex, is opening a facility in Palo Alto. The company has hired Vishal Makhijani, who was previously general manager of Yahoo's search group.

"We did not hesitate to go the extra mile to find this rare talent,” said Arkady Volozh, CEO of Yandex, the parent company. “We are excited to add a leading technology and business veteran in Silicon Valley to the Yandex team. Vish and his group at Yandex Labs will help to extend and improve Yandex’s core technology capabilities including the quality of algorithmic search for the Russian audience."

See: Search Gaint Yandex To Raise $2 Billion
See: Russian Web Advertising Market Booming

Yahoo On Life Support. What Went Wrong.

Exactly one year ago to the day, I wrote about Yahoo being a casualty in the search war. The war has taken its toll and Yahoo is on life support today.

It all began when Jerry Yang made the catastrophic mistake of hiring Terry Semel in 2001. Terry had a backward view of the world. His experience was in Hollywood where everything was packaged. The internet business, however, is like a "live play" where you have to think on your feet. And thus, he was not equipped to move Yahoo forward as he was lost himself. He did not even know what email was when he came to Yahoo and he was baffled when employees would send email. He thought they should just pick up the phone and call or walk over to their desks to talk to each other.

Terry's lack of insight lead Yahoo down a path of portalization, where information was pushed to the user. He failed to see that the next generation of internet technology was changing the balance of power on multiple fronts such as electronic publishing, digital marketing, storage and retrieval - all areas suited to search - which Google packages and delivers today using a simple interface.

He ended up turning Yahoo from a technology company to a media company with marginal economies of scale. In fact, Farzeed Nazem, CTO, spent more time filing papers with the SEC over stock options purchases and sales than doing his job, as there was no need for him. It was an internal joke that he was in hibernation.

Blowing Jerry's Money

Susan Decker would routinely tell the press that "Yahoo's goal is not to be number one in search" as Terry had convinced them that a company driven on celebrity power would overcome anything.



The only thing Yahoo had left was eyeballs. I was not convinced Yahoo could continue on this path and I asked Terry if a Microsoft take over of Yahoo was inevitable. Terry was puzzled. He was absolutely clueless about what was going on. He was more worried about where Brad Pitt and Tom Cruise might be next so that he could be there and splash some Yahoo money and impress his Hollywood buddies. Terry knew Hollywood was all show and no cash; but with Yahoo money, he could rule Hollywood.

By this time last year, Jerry realized that things were in free fall and he took the helm to avoid a crash landing. Two weeks prior to the Microsoft takeover, I informed Jerry and company that a takeover was imminent. Jerry did not even realize how low they were to the ground. Microsoft offered Yahoo $44 billion and in the end, Yahoo surrendered to Google for pennies.

I believe Jerry Yang is resilient and he might still be able to turn the company around if he remains at its helm after the shareholders meeting on August 1.

As for Terry Semel, he has left behind a trail of destruction. He has made Silicon Valley brainiacs the butt of jokes in Hollywood and he made 500 times more money sinking Yahoo into the ground than he made doing his best work. Today, Terry is still busy selling Yahoo stock and he has sold over $600 miilion to date.

Jerry Yang's Father's Day Letter To Steve Ballmer

Dear Steve,

Are you kidding me? There is no way we're selling out to the Evil Empire. You guys couldn't find a clue if you had a better search engine:

- $44.6 billion? How am I supposed to buy "Star Trek" collectibles with that?
- All those antitrust hearings would seriously cut into my Wii play time.
- Yahoo! freakin'! rules! Does your company have an exclamation point in its name? I didn't think so.

Go to hell (and have a Yahoolarious day),

Jerry Yang
Chief Yahoo!



Source: NY Post

NY Times Father's Day Gift To Jerry Yang: Its's No Longer Your Baby

To: Jerry Yang
From: Joe Nocera
Re: Shafting Yahoo’s Shareholders

Dear Jerry,

Congratulations — you pulled it off. You got Microsoft to walk away from your beloved Yahoo for good. The final word went out on Thursday...

...announcing a Google deal just a few hours after you and Microsoft revealed that your talks had officially ended. According to your press release, Yahoo will soon begin running ads sold by your archrival...

...you’ve chosen to become a pawn of the most dominant company on the Internet. How exactly is that going to lead to a brighter future for Yahoo?

...Here’s the problem, Jerry. It’s not your baby. It hasn’t been since 1996, when Yahoo went public.

...It sure didn’t look as though you ever took those negotiations seriously. You rarely brought any of your investment bankers... and sometimes the only person you brought along was Mr. Filo — who isn’t even on Yahoo’s board!

...Yang engineered an ingenious defense creating huge incentives for a massive employee walkout in the aftermath of a change of control... The plan gives each of Yahoo’s 14,000 full-time employees the right to quit his or her job and pocket generous termination benefits at any time during the two years following a takeover, by claiming a ‘substantial adverse alteration’ in job duties or responsibilities.”

... it actually encourages Yahoo employees to quit after a takeover, by guaranteeing them a financial windfall that Microsoft would have to pay. And since it cannot be upended even if the board is ousted, or the company is taken over, it also discourages anyone from trying to take over Yahoo.

Jerry, you’re a billionaire because people all over the world bought your stock, and trusted you to do right by them. That’s the compact you make when you take a company public: you get to be really rich, but in return, you have an obligation to do everything you can to ensure that shareholders get a healthy return on their investment. It doesn’t matter that you would like Yahoo to remain independent, or that you can’t stand Microsoft. Your feelings aren’t supposed to get in the way of your fiduciary duty.

A takeover by Microsoft was your last, best hope of rewarding your long-suffering shareholders. Now that opportunity is gone. It says here Mr. Icahn is not going to go as gently into the night as Mr. Ballmer did — and if I were a betting man, I would be taking odds that your days as Yahoo’s C.E.O. are numbered.

It’ll be better for everyone to have someone in that role who understands who he’s supposed to be working for. Wouldn’t you agree?

For entire NYT Post.

Yahoo To Pay Google $250 Million Break Up Fee

I am puzzled, was Yahoo in such dire straits that they could not negotiate a better deal? Yahoo has agreed to pay Google a break up fee of $250 million if the partnership falls apart within the first two years.

If the Services Agreement is terminated by either party within 24 months ... Yahoo! is required to pay to Google the sum of $250,000,000...

Under the proposed deal Yahoo anticipates on making $250 million to $450 million in operating cash flow in the first 12 months following implementation. On a profit basis Yahoo could probably be even losing money.

Not only is Yahoo in a position to lose money but in 2 years its search advertising business will be obliterated by Google, Yahoo would have become dependent on Google for its search advertising and in the process handed Google a multi billion dollar monopoly.

See: Yahoo's Casualties in Search War

Search Report: Google Up, Yahoo & MSN Down

Google accounted for 68.29 percent of all U.S. searches in the four weeks ending May 31, 2008, Hitwise announced today. Yahoo! Search, MSN Search and Ask.com each received 19.95, 5.89 and 4.23 percent respectively. The remaining 41 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.63 percent of U.S. searches.

Percentage of U.S. Searches Among Leading Search Engine Providers

Domain	May-08	Apr-08	May-07
www.google.com	68.29%	67.90%	65.13%
search.yahoo.com	19.95%	20.28%	20.89%
search.msn.com	5.89% *	6.26% *	7.61% *
www.ask.com	4.23%	4.17%	3.92%

Note: Data is based on four week rolling periods (ending 5/31/ 2007, 4/26/08, 5/26/2007 from the Hitwise sample of 10 million U.S. Internet users. * - includes executed searches on Live.com and MSN Search but does not include searches on Club.Live.com.

In the U.K. market, Google search properties (Google.co.uk and Google.com) accounted for 87 percent of all UK searches in May 2008 representing a 12 percent increase compared to May 2007. Yahoo! search properties accounted for 4.09 percent of UK searches in May 2008, a 2 percent increase compared to April 2008. MSN search properties accounted for 3.72 percent and Ask search properties accounted for 3.07 percent of searches. MSN increased two percent compared to April 2008 and Ask increased 6 percent.

Percentage of U.K. Searches Among Leading Search Engine Providers

Domain	May-08	Apr.-08	May-07
Google Properties	87.30%	87.69%	78.28%
Yahoo! Properties	4.09%	4.01%	8.58%
Microsoft Properties	3.72%	3.65%	5.46%
Ask Properties	3.07%	2.89%	4.96%

Note: Data is based on UK Internet usage over the four week rolling periods (ending 5/31/ 2007, 4/26/08, 5/26/2007) from the Hitwise sample of 8.4 million UK Internet users. Note that the percentages for the search properties include the .uk and .com domains.

Google an Increasing Source of Traffic to Key U.S. Industries
Search engines continue to be the primary way Internet users navigate to key industry categories. Comparing May 2008 to May 2007, the Travel, News and Media, Entertainment, Business and Finance, Sports, Online Video and Social Networking categories showed double digit increases in their share of traffic coming directly from search engines.

U.S. Category Upstream Traffic from Search Engines and Google - May 2008

Category	Percent of Category Traffic from Search Engines, May-08	Percentage Change in Share of Traffic From, Search Engines, May-08 - May-07	Percent of Category Traffic from Google, May-08	Percent Change in Share of Traffic From Google, May-08 - May-07
Health and Medical	45.76%	3%	30.86%	5%
Travel	34.81%	11%	24.26%	21%
Shopping and Classifieds	25.48%	2%	16.84%	8%
News and Media	21.70%	7%	14.53%	10%
Entertainment	24.33%	17%	15.76%	22%
Business and Finance	18.15%	14%	11.73%	22%
Sports	13.09%	17%	8.81%	24%
Online Video*	29.94%	37%	20.78%	52%
Social Networking*	16.50%	18%	9.98%	21%

All figures are based on U.S. data from the Hitwise sample of 10 million Internet users.
* denotes custom category
Source: Hitwise

Yahoo's Response to Icahn: We are NOT a Doomsday Machine!

The Yahoo board has responded to corporate raider Carl Icahn's sharp criticism and call to action with this tiny note out today:

SUNNYVALE, Calif., Jun 06, 2008 (BUSINESS WIRE) --
Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today issued the following response to Carl Icahn in response to his letter dated June 6, 2008:

Leaving aside Mr. Icahn's inaccurate interpretation of our retention plan, we again note that he has no credible plan to operate Yahoo!. We believe that Mr. Icahn's suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo! and would clearly
not be in the best interests of our shareholders. Furthermore, his suggestion that we put out a price publicly to see if Microsoft will alter its stated position is ill-advised. As we have stated numerous times publicly and privately, we are open to any transaction including a sale to Microsoft if it is in the best interests of shareholders.

The last cryptic sentence is likely to infuriate Icahn (and many anxious shareholders) given that there is little indication the Yahoo board is willing to see any realistic Microsoft deal as in "the best interests of shareholders".

Frankly, I would not want to be a board member at Yahoo now. Clearly it is in the interest of shareholders to be *open* to some price from Microsoft and also open to the possibility of a new board, and clearly the current board does not appear to feel either of these options are worthy of consideration. Although it is reasonable for a board to be optimistic about the potential of a company to surpass realistic expectations, this optimism should be weighed against a very realistic assessment of the best interest of shareholders.

I'm guessing the next move by Icahn will be to get Microsoft to commit to a price - probably in the neighborhood of $35 - with the understanding that MS rather than Yahoo will be in charge of retention and incentives and that the current board must go.

Disclosure: Long on YHOO

Microhoo - Here It Goes Again - OK Go

I think this speaks for itself!

Search Gaint Yandex To Raise $2 Billion

Russia's biggest internet firm Yandex plans to raise up to US$2 billion in an initial public offering that would give the company a public valuation of US$5 billion according to Reuters.

Yandex topped both Yahoo! and Microsoft with 528 million search queries (or 2.2 percent of European searches) in March 2008, according to comScore. Yandex reaches over 62% of Russian internet audience with more than 47% of all searches conducted in Russia, followed by Google, Rambler, and Mail.ru. Yandex reported revenues of $167 million in 2007.

The company was founded founded in 2000 by CEO Arkady Volozh and CTO Ilya Segalovich. They currently own about 30 percent of the firm and have raised $5.3 million in capital from investors.

See: Russian Web Advertising Market Booming

Microsoft Email Leaked: Focus Search, Social Media, Display Ads & User Experience

From: Kevin Johnson
Sent: Sunday, May 18, 2008 1:30 PM
To: Platforms & Services Division; APSP FTE - Adv & Pub Solutions Platform; Employees.all.corp.adf@main.corp; Employees.all.adf@main.corp
Subject: Online Services Strategy Update

We have been executing against the core strategy I first presented at our Financial Analyst Meeting in July 2007 to go after the growing opportunity in online services and advertising. Four pillars have formed the basis of our strategy:

1. Consolidate ad platform and win in display
2. Innovate and disrupt in search
3. Deliver end-to-end user experiences across PC, phone, and web
4. Reinvent portal and social media experiences

We have many options that support acceleration of our strategy. As announced earlier today, we are also considering new alternatives for a transaction with Yahoo! which do not involve a full acquisition. At this time, we have not made a new bid to acquire all of Yahoo!, but we reserve the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo!, shareholders of Yahoo! or Microsoft, or with other third parties.

Regardless of the outcome of any new discussions, it is important that we continue to move forward to strengthen our online services business. The fact is that we are not where we want to be in this business yet and we've been in this position longer than we'd all like. To that end, we will be accelerating elements of our core strategy, and breaking ground in new areas.

On Tuesday, Brian McAndrews is hosting advance08, our annual advertising conference here in Redmond. Over 400 leaders from across the media, technology and advertising landscape will be here for two days to engage in dialogue on industry trends and opportunities. These leaders are some of our closest partners in the digital transformation of the advertising industry, and they recognize the increasingly important role Microsoft plays in this transformation.

We are very excited to have these customers and partners on campus.

Brian's keynote will highlight our unique position in the advertising industry. It's amazing to see how far we've come with the aQuantive acquisition in differentiating our advertising platform. This foundation is paying off, with Q3 advertising revenue growth of nearly 40%, a rate that has accelerated over the past two quarters while growth rates at Google, Yahoo and AOL have slowed.

On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You'll hear more about our plans Wednesday.

advance08 will underscore our commitment to search and online advertising, and you'll continue to see announcements demonstrating our progress in this space. Earlier this week, I spoke to leaders across our online services business about our core strategy, the importance of acceleration and a set of actions we are taking, including:

1. Innovate and disrupt in search - We will disclose some elements of our plans with this week's release of search and sharpen our focus on user experience and business model innovation. The work we have done over the last 4 years on search has established a solid foundation to build upon.
2. Win targeted distribution - With this release of search, we are now ready to throttle up broader distribution initiatives.
3. Reinvent portal and deliver new experiences across PC, phone and web - We are building our new releases of Windows 7, Windows Live wave 3, Windows Mobile 7, Internet Explorer 8, Search and MSN with an eye towards optimizing and unifying experiences and scenarios.
4. Fix our online branding - Our brands are fragmented and confusing today, and we recognize a need to clarify and align our online branding. We are now driving forward to address this opportunity.
5. Win in display advertising - We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation.
6. Build on our strengths in Europe - As measured by comScore in March, our online business in Europe is doing well. We have over 3 times the page view volume and nearly 7 times the minutes of usage compared to Yahoo!, and 68% reach to internet users throughout Europe. We will double down on our investments in Europe and expand on this strong position.
7. Expand strategic partnerships - In addition to our organic innovation agenda, we will expand strategic partnerships that increase inventory on our display ad platform, enable new paradigms in search and accelerate growth in key geographies.
8. Pursue small, targeted acquisitions - Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies. Recent acquisitions including Rapt and YaData are examples of these types of acquisitions.

The PSD leadership team is actively working on the FY09 budget, including resources and investments to support the actions above. Additional elements of our work will be revealed in the coming weeks, leading to our Financial Analyst Meeting in July where I will share more details on our strategy and business/financial outlook.

As we move forward, I want to remind everyone that we are well positioned to compete. We have some of the industry's best assets on our side: technical and business talent, global scale, a culture of self-criticism and tenaciousness, a healthy balance sheet and an unparalleled product portfolio. It's time for us to seize the opportunity.

Thanks again for your continued leadership and focus on our business. If you have any feedback or thoughts, please feel free to send me mail.

Regards,

Kevin Johnson

Microsoft to Yahoo With A Little Bit Pregnant Plan

After Yahoo spurned their initial offer Microsoft said they were no longer in the game to aquire Yahoo. However corporate raider Carl Icahn entered the fray last week with a proposal that would force Yahoo into Microsoft's arms, netting Icahn a huge payday if Microsoft ponied up the $33+ they were clearly willing to pay before.

As if this deal was not already complicated enough, Microsoft is now proposing to Yahoo some form of collaboration on search, presumably a deal where Microsoft and Yahoo search teams would team up against Google.

We'll have to wait for more to critique the plan but at first glance I'd suggest this is a weaker plan than a full aquisition as it will wind up connecting two challenged search divisions at a time when clear, bold, innovative leadership is needed. I can't imagine Jerry Yang working under Microsoft guidance and getting much done, and conversely I can't see him successfully directing Microsoft folks towards the search success that has been eluding Yahoo for so long.

Microsoft Press Release

Disclosure: I'm still long on YHOO

How To Beat Google According To Mark Cuban

Blog Maverick - Mark Cuban has added his voice to the chorus on beating Google. Cuban presents a plausible argument. He argues that in essence, its no different that any other content aggregation play. Its paying for content. Here it is:

Is there anything more fun than sitting around, growing your hair, drinking a Bud while listening to Jethro Tull and pondering how to change the balance of power in the search world and unseat Google?

Better search? Too subjective. Better monetization? After the fact. Better User Interface? Will we know it when we see it? A new and different search? Semantic? Human powered? We won't know till we know.

But what about the Google Index, all the websites that are indexed by Google? What is it worth to be in the Google Index? What would you, as a website owner require in order to remove your site from the Google Index and no longer be available when someone does a google search?

It should just be a matter of dollars and cents and sense, shouldn't it?

How many websites would have to recuse themselves from the Google Index before Google Search was negatively impacted?

Mahalo.com thinks it needs to support the 25K most common search terms in order to be successful. What would happen if MicroSoft or Yahoo or a MicroHoo went to the 5 top results for the top 25K searches and paid them to leave the Google Index?

A theoretical maximum of 125K sites, but with overlap, probably closer to 100K or less, times how much per site on average?

The math starts to get interesting. At $1,000 per site average times 100K sites, thats only $1 Billion Dollars. The distribution would obviously favor the larger sites, so of that billion dollars, would the top 1K sites take 500K each and the remaining 99K split the rest?

Given the stakes, why stop at $1 Billion Dollars? Would the top 1k most visited sites take a cool $1mm each, plus a committment from MicroSoft or Yahoo to drive traffic through their search engines to more than make up for the lost Google Traffic. After all, once consumers realized that Google no longer had valid search results for the top 25K searchs, that traffic would most likely go to MicroSoft and Yahoo.

And why we are at it, why not require that these 100k sites switch from Googles Publisher Network to Yahoo's or MicroSofts? It would start to earn back the $1 Billion paid out very quickly.

On top of that, in order to grease the skids even further, why not issue advertising credits to the sites that switched off Google? Its soft dollars, that would sweeten the pot and drive more traffic.

IN essence, its no different that any other content aggregation play. Its paying for content. But, it would take some big ones to go for it and see if it worked. However, without question, every search engine has some number of core sites, that when removed from its index, destabilizes the value of its search.

The question is how many? What would it cost to get that number of sites to turn Google off and stay off, and would the traffic created as users switch from Google more than compensate for the cost?

Or would Google recognize the risk and jump in and offer more to websites to stay?

Sure would be interesting to find out.

Can Icahn Yahoo?

Carl Icahn has notified the Yahoo board that he'll be leading a takeover of the company. The letter below was his notification to Yahoo, and included his intention to buy 2.5 billion in stock. Presumably Icahn has already confirmed that Microsoft is still interested in a takeover, and given Steve Ballmer's legendary temperament I'm guessing that he is giddy at the prospect of ultimately winning the battle he walked away from a few weeks ago.

I think Icahns prospects of losing this are small, and would guess he's in for one of the biggest paydays in corporate history. While Yahoo's board obsessed over the Microsoft takeover many shareholders simply wanted the best return on their Yahoo investment. Given that no dramatic new strategic proposals have come from Yahoo in (over a decade?), few shareholders are going to be willing to hold their breath while the current board pretends to be making major changes at the company that would justify a stock price in the ballpark of what Microsoft has already offered.

The fat lady is singing, and her name is .... Carl Icahn.

------------------------------------------
Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153
May 15, 2008

Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Mr. Bostock:

It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.

During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered today to Yahoo under separate cover.

While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain "strategic alternatives". I therefore hope and trust that if there is any question that these "strategic alternatives" might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.

I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.

Sincerely yours,

CARL C. ICAHN
----------------------------

Disclosure: Long on YHOO

Yahoo! Buzz Surpasses Digg

Acccording to comScore unique visitors on Yahoo! Buzz surpassed Digg in April for the first time. Buzz got nearly 7 million U.S. unique visitors which is 74% growth over March.

Buzz, is a social news service by Yahoo! that is similar to Digg. These site can drive a large amount of traffic and comments to websites.

The following graph shows that, for the first time, Buzz's traffic surpassing Digg's in unique visitors per month.

What's more, about 51% of Yahoo! Buzz users are women, compared to just 39% women for digg.

Icahn Eyes Yahoo for Possible Takeover

Billionaire takeover strategist Carl Icahn is looking at a possible play to force Yahoo back to the table with Microsoft to sell the company at a big profit. The news today sent Yahoo up about 1.30 and YHOO is still rising in after market trading.

Given that the prevailing stock price of Yahoo is well below Microsoft's top offer of $33 per share, this play has only one key challenge - making sure you can get Microsoft back to the table. Frankly I think that is not much of a hurdle to overcome as I think Microsoft Steve Ballmer's decision to drop the bid was 1) Mostly strategic to force the issue and 2) Will be quicly overcome if Icahn can seat a more sympathetic board of directors.

I'm guessing that Ballmer will have two basic requirements to return to the Yahoo table:
No Google deals and no more Jerry Yang. Although it would be sad to see a founder of Yang's vision leave the company one does not need to feel too sorry for him. A Microsoft merger would value his stock close to 100% higher than the lows of a few months back, netting Yang in the neighborhood of an extra half billion over that low price.

Of course Yang has seen Yahoo trading at over $100 and I think part of his malaise over the deal is a longing for the good old pre-Google days where Yahoo was the high flyer in terms of value and buzz. Sorry Jerry, but despite Yahoo's suberb ongoing work in many aspects of the online experience, those days ... are ... gone.

Most analysts do not feel Yahoo can sustain even the current price levels without the "threat" of a takeover looming, which is propping up a share price that will likely drop to $20 or below if Yahoo had no serious takeover suitors. In fact YHOO was trading at about $18 per share a few months ago just before Microsoft bid which valued the internet empire at about 60% more than the market. Yet Yahoo argued this was not enough and the board, especially in the form of CEO Jerry Yang, went to great lengths to prevent the Microsoft Merger.

Icahn is no stranger to this takeover strategy and the graph above shows how successful it has been for him.

Image Credit: Fortune Magazine
Disclosure: Long on Yahoo

Microsoft's New Plan Same As The Old Plan

Microsoft's proposed bid for Yahoo was its fastest way to gain the scale necessary to compete against Google for online advertising dollars. Even before pulling the Yahoo offer, the company he had begun laying the groundwork for a strategy to compete with Google in online advertising. Microsoft CEO Steve Ballmer is convinced that online advertising is crucial to its future. So much so that he sees online advertising making up as much as 25% of the company’s business within a few years. Google generates approximately US$ 22 billion versus Microsoft's US$ 3.3 billion from online advertising.

Consumers and businesses increasingly are switching from desktop software like Microsoft's to free online services that do the same things. "We are absolutely committed to be the leading player in that endeavor," Ballmer told employees at a recent gathering.

Google dominates the market, taking in 77% of the revenues from search advertising where as Microsoft has 5% of U.S. search revenue, according to search marketing firm Efficient Frontier.
Acquiring Yahoo would not have given Microsoft the revenue nor the search market share it is seeking for, as Yahoo's strength is in display advertising not search advertising.

Microsoft Seven Times Bigger Than Google In Display Ads
Microsoft's share of the display advertising market is already about 7 times larger than Google's. Although the display market is smaller than search, it's expected to grow faster over the next few years because of a surge in video ads. Market research firm IDC figures that by 2012 the display market will double, to $15.1 billion; revenue from search will reach $17.6 billion.

Microsoft makes money in the display business in two ways. It sells ads on its own popular web sites, such as MSN and Hotmail, and it acts as a broker by placing ads on other companies' web sites and then splitting the revenue with them much like Google's Adsense Program. Smaller web sites use Microsoft because they don't have a salesforce to call on advertisers and ad agencies. And even large players like media giant Viacom have found that letting Microsoft sell some of the space on sites like Comedy Central and MTV can lead to higher revenues. "They can achieve better monetization than we can on our own," says Viacom CEO Phillipe Dauman.

It's All About Display
Microsoft's new pitch is that, in display advertising, the company has the most sophisticated technology of any company. It can help advertisers precisely target display ads and assess the value of ads even when web surfers don't click on them. Microsoft is also making the case that search advertising, Google's gold mine, is overrated. Soon the company, it plans to introduce new ad technology that it says will demonstrate that to advertisers. "We're going to win with this strategy," said Keith Lorizio, Microsoft's advertising manager. More>

Image Source: Forbes

Yahoo Shares Drop as Microsoft Merger Melts

Yahoo shares opened this morning at $23.02, down $5.65 from yesterday's close. However Yahoo has bounced back a bit to just under $25 per share at 1pm, perhaps reflecting investor's optimism that a deal will still be struck with Microsoft after what some - including me - think was a case of MS CEO Ballmer calling Yahoo's high price bluff.

Jerry Yang wrote investors and the public today at the Yahoo Andecdotal blog in a post titled "OK, so now what? There he writes:

We’ll continue to execute on our plan — making your Internet experience as personal, relevant, open and social as possible, serving advertisers so well they insist on working with us, and opening up Yahoo! in a way that developers dream of. And, we’ll also continue to pursue strategic opportunities that position us for long-term success.

Jerry also appeared to be doing a bit of covering Yahoo's butt in what is likely to be a spate of shareholder lawsuits suggesting Yahoo should have sold the company at the price offered:

Frankly, there’s a lot of nonsense and misinformation in what’s being reported. Just so we are all clear, here’s what happened. The board took its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo! and was in the best interests of our stockholders.
No one is celebrating about the outcome of these past three months… and no one should.

But wait ... didn't somebody hear a champagne cork pop at Jerry's house? His statement does not really jive with the open letter from Steve Ballmer or the rumor mill where it has been strongly suggested that Yahoo was a lot more interested in killing this deal at all costs than compromising in any reasonable way.

Disclosure: I am (still!) long on YHOO

Microsoft and Yahoo

Both in the mainstream TV news and online there seems to be a lot more noise than signal about the Yahoo Microsoft merger situation. I still think that Microsoft plans to acquire Yahoo and that they will find a way to make it happen over the next few months.

This view seems to put me in the minority because many are saying the deal is "dead". That is technically true of course - Microsoft withdrew their offer yesterday - but Ballmer's letter made it very clear that he was still open to a sale, and I think a quick read between the lines suggests he is trying to set up Jerry Yang for a hard fall. Without help from Google it'll be tough for Yang to keep his post after spearheading the effort that will effectively revalue the stock from Microsoft's top offer of $33 to tomorrow's open which is likely to be in the low $20's.

Techcrunch is reporting that the valley rumor mill suggests Yahoo is trying to get a Google deal announced before tomorrow's opening to avoid a major Yahoo selloff, and given the very favorable view of Yahoo from top Googlers Page, Brin, and Schmidt and their mutual distate for all things Microsoft I think this deal is probably going to happen, though I also think it will not do much to immediately prop up Yahoo's stock price which is likely to go down $5-$8 at tomorrow's open and possibly even more if frustrated investors decide it's time to give up on the company.

Disclosure: Long on YHOO

Ballmer's Letter to Jerry Yang Withdrawing Microsoft's Offer

Following is the verbatim text of the letter from Microsoft's Steve Ballmer to Yahoo's Jerry Yang. The source of this letter is Microsoft.

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

• First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

• Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

• In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

• This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

• It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

------------------------

Analysis:

As we noted in the previous post there is good reason to believe that Microsoft is still in this to win Yahoo. Ballmer even uses the word "remains the only alternative", suggesting that the offer is still informally on the table. Ballmer somewhat ominously says:

.... our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

The Yahoo board is likely to have significant concerns already about shareholder lawsuits if the stock tanks following Microsoft's withdrawl, and this statement seems designed to drive that board vs shareholder wedge even further.

Of great concern to Ballmer in the letter are Yahoo's negotiations with Google to have Google take over Yahoo advertising. Ballmer implies that Microsoft was very concerned about the ability to compete with Google using online advertising tools. Yahoo is now refining the adwords-like "Panama" but may diminish that project if Google starts handling Yahoo monetization of advertising. Ballmer also suggests that Yahoo negotiators were using this Google alliance as something of a "poison pill" to kill the deal.

So, has the fat lady sung yet? I think not, and we are in for more fun as the high stakes game for the control of the internet ... continues.

Disclosure: Long on YHOO

Microsoft Walks Away From Yahoo

Microsoft has walked away from the merger talks with Yahoo after the two companies failed to reach agreement on price per share. Microsoft had increased their original offer of $31 per share in cash and stock exchanges to $33 per share (I'm not clear if that $33 took into account Microsoft's lower price since the initial offer or did not factor that in). Most reports said that Yahoo eventually indicated they would sell for $37 per share.

My take on this is that this is a clever strategic move by Ballmer and Microsoft who I think still plan to acquire Yahoo. Yahoo's share price is likely to be hit fairly hard by this development effective at Monday's open, probably sending Yahoo down significantly though it would seem unlikely Yahoo will approach former lows.

The degree of the share price drop will depend on whether the market thinks Microsoft is out or just bluffing, but either way this is likely to create a lot of downward pressure on Yahoo's share price. Microsoft will likely start buying shares on the open market at these reduced prices.

In the next post we'll take a look at today's letter sent by Microsoft CEO Ballmer to Yahoo CEO Yang, which suggests it is lucky for Jerry that Steve didn't have any chairs handy.

CNET Reports
Disclosure: Long on YHOO

Microsoft Yahoo Merger: The Four Dollar Divide

The Wall Street Journal is following Microsoft and Yahoo closely and via Google news you can read part of the WSJ report here but for the full WSJ go to Google News and select the story from there.

Microsoft has indicated that they will raise their offer to $32 or even $33 to avoid a hostile takeover fight, and Yahoo appears to be willing to settle in the neighborhood of $37. With only four dollars per share standing between a huge black eye for Ballmer and a collapse in Yahoo's price how long can this go on?

Not long at all.

I'd suggest a decision will be made by next Monday, and both companies will settle in at very close to $34 per share. Microsoft now appears almost certain to win a proxy battle given Yahoo's share price weakness with no real prospects for a big upswing in YHOO's price. The Yahoo board still has some negotiating power in that a hostile battle is probably an undesirable prospect for all parties and they can force that to happen, but by this time everybody knows Yahoo would lose that fight.

The union will threaten Google's dominance and shake up the internet for years to come, though the merger will only be the beginning of a very complex melding of different corporate cultures and company vision.

Disclosure: Long on YHOO

Microsoft and Yahoo: What Will Ballmer Do?

The "deadline" imposed by Microsoft on Yahoo expired yesterday, which makes it likely that Microsoft is either preparing to drop their bid or - and this appears a more likely scenario - preparing for a hostile takeover where they'll try to get a new slate of directors approved for Yahoo who would view the takeover favorably, leading to a probable merge this summer.

Yahoo's board meets today and although it would be interesting to be there I'm certainly not envious of the Yahoo board right now. If Microsoft drops their current offer Yahoo stock is likely to drop severely - perhaps even below the 52 week low into the high teens. Shareholders will be understandably upset if fighting Microsoft has led to nothing more than a 30%+ drop in share price. Some have suggested a Google advertising partnership may help matters but I'm skeptical that the broad market views Yahoo as favorably as Yahoo seems to think. If they did one would expect Microsoft's share price to be faring much better than it has while people await the takeover verdict. In fact most stock watchers are convinced that if Microsoft announces they are dropping the quest for Yahoo MSFT will see a significant jump in share price.

Larry at CNET has noted some interesting alternative scenarios to a Microsoft Yahoo merger, even including a CNET option.

I think my prediction is the same as it has been for some time: Microsoft will start the hostilities but will also let Yahoo know they can get about $34 per share if Yahoo does not put up a fight. Yahoo will (finally) give in to avoid a potential price meltdown, lawsuits, and a fight that is only going to misdirect energy while both companies watch Google scoop up the increasing online advertising revenues.

Disclosure: Long on YHOO

Feeling Lucky?

Over at CNET Steve Tobak is wondering how much of a role luck plays in business success. Tobak nots some big lucky breaks in business such as Bill Gates' landing the IBM OS contract that launched Microsoft after being second choice for the job, but he winds up concluding:

... in my experience, passion, intelligence, hard work, perseverance and timing play a bigger role in success than luck.

I'm in partial agreement but I don't think I'm as convinced as Steve that things we can control play a big role in business success. If they did simply cutting loose a bunch of hard working, smart folks on new projects would generally bring success, and this is rarely the case. In fact if we look at most of the most conspicuous tech success stories of the century they seem to be more a product of a small number of people finding new solutions to major problems, often stumbling into success.

Yahoo, Google, Microsoft, and Apple all started small - very, very small in fact - and I think all of them would have happily sold out for tiny fractions of their current values very early in their growth curves before the founders understood the significance and magnitude of their key technological innovations. Yet they did not sell out because in I think all these cases there were not serious buyers who were willing to pay much in the early stages. Neither the founders of these tech behemoths, nor the key players who could have bought them out realized the potential impacts of these companies. All these four, and hundreds of other smaller companies, have gone on to become global leaders and global brands.

I'm not suggesting they were just lucky, but I think serendipity may play a large role in success, and it is probably helpful to recognize that success may come as much from circumstances that you cannot control as from things you can.

Yahoo's Open OS: Really, Really Open

Larry Dignan and Dan Farber at CNET have the early scoop on Yahoo's freshly unveiled Yahoo! Open Strategy somewhat cryptically labelled .... "Y!OS"

Ari Balogh, Yahoo CTO said at the San Francisco Web 2.0 Conference today:

“We are taking open to a whole other place,"... “We are rewiring
Yahoo from the inside out with a developer platform that will open up the assets
of Yahoo in a way never done before, making the consumer experience social
throughout and provide hooks to developers.”

It is too early to know if this type of openness will be embraced by developers to the degree needed to make a significant impact in the way people use Yahoo services, but it is very encouraging to see how the key players are racing to claim the title of the "most open" online environments. Facebook's API's were followed by Google Open Social and now Yahoo which appears to offer more programmatic freedom than ever across Yahoo's massive number of network assets and 500,000,000 person user base.

Microsoft: Despite Record Earnings Stock Falls in After Hours Trading

Microsoft (MSFT) reported record earnings for the quarter but recent stock price increases appear to have anticipated a stronger report as the stock has fallen about 1.38 per share in after hours trading as of 4:34 pm EST.

Still, very favorable earnings reports are now in from Tech giants like Google, Yahoo, Apple, and Microsoft. Could all the talk of severe recession problems be overblown when applied to the tech sector?

Over at Yahoo Tech Aaron Task reports:

A funny thing is happening amid all the recession talk: Most big tech companies are reporting spectacular earnings and revenue growth, especially those with significant overseas business.

Disclosure: Long on YHOO

Yahoo Tops Consensus at .11 Per Share

Yahoo (YHOO) reported earnings of about .11 per share after the market closed today, in line with the "whisper numbers" of this morning but handily topping analyst estimates of .09 per share.

Henry Blodget has some real time analysis as the market digests this news, which appears unlikely to have a significant impact on the Microsoft merger deal except perhaps to bump up Microsoft's acquisition offer by a few dollars per share.

As the news rolls in YHOO is only up about $0.10 in after hours trading, indicating that this "good news" may be seen more as "no news" by markets that will likely soon be clamoring for some closure to the Microsoft situation.

Disclosure: Long on YHOO

Mechanical Zoo - Social Networking Brilliancy or Just Monkey Business?

Mechanical Zoo has an impressive startup team include Google News product lead Nathan Stolle. The concept, according to Zoo member Ventilla quoted at CNET:

... tackling the problem of subjective search--when no one answer would satisfy everyone--and the answer is not to serve a Web page," Ventilla said in an interview. "We've developed an online social structure that lets users reach out to people they already know" for answers.

Integrating social networking into the search experience seems to be one of the most promising ways to solve several problems with the search applications of today. Even just the power of social environments (like Digg) to help eliminate spammy entries from search results has obvious potential to improve the search landscape. A robust social network where users are interacting not only with respect to quality websites and blogs but actually generating content to answer questions would be a strong offering.

Mechanical Zoo is not alone in this quest and some would argue that services like Yahoo Answers have already built this type of environment. Unfortunately for Yahoo, Answers appears to have been more successful as a question and answer environment rather than as a thriving social network. Can Mechanical Zoo bridge that gap?

Disclosure: Long on YHOO

Yahoo Earnings Out Today

Despite some breathless pronouncements that Yahoo's earnings report will be a watershed moment in the company's long history, I would strongly suggest that Yahoo's earnings are unlikely to have much if any impact on the fate of the company - a fate that is very likely squarely in the hands of Microsoft.

Obviously if the Q1 earnings come in way above the modest analyst expectations it is possible that Yahoo will escape a Microsoft merger by "earning" in the eyes of the market a much higher valuation. However the most likely scenario has Yahoo coming in with earnings that are in line with or only modestly above analyst expectations. Given how hard Yahoo is now working to improve the company's prospects and fend off a Microsoft takeover even a modest improvement is unlikely to be viewed all that favorably by investors. A few dollar increase in the share price might up Microsoft's bid for Yahoo, but it is unlikely to change the game much.

Assuming today's after close earnings are pretty much in line with analyst expectations of about .09 per share you can expect Microsoft to proceed with a proxy fight to takeover Yahoo, and you can expect Microsoft to win this battle. Investors - apparently even some major investors on the Yahoo board - have tired of Yahoo's failure to capitalize on their many strengths to challenge Google's online dominance.

Barring spectacular YHOO Q1 earnings, the fat lady sings today, and she's singing a Microsoft tune.

Disclosure: Long on YHOO

Microsoft Buys Farecast For $115,000,000

Microsoft has purchased the innovative travel service "Farecast" for a reported $115,000,000. SeattlePI has more about this breaking story. Farecast uses a predictive algorithm to help users determine if airline ticket pricing is poised to go up or down from the current levels and thus helps to find bargain pricing online.

Rather than develop extensive "Web 2.0" features internally, it is becoming very clear that Microsoft is trying to fuel their massive new web initiative with cash, buying companies like Farecast (and Yahoo) that can make Microsoft an immediate player in the rapidly evolving online environment.

Disclosure: Long on YHOO

Wall Street Journal: Yahoo and Google May Become Search Bedfellows

The Wall Street Journal is reporting that Yahoo and Google are closer than ever to a deal where Yahoo would outsource their search monetization to Google. Google continues to do a much better job of producing revenue from searches - some estimates suggest that Google gets more than twice Yahoo's revenue per search click.

Yahoo also is continuing to negotiate with AOL as part of Yahoo's efforts to stave off a takeover by Microsoft.

The Journal suggests that Yahoo's April 22 earnings report may play a key role in the Microsoft takeover argument. If Yahoo comes in with strong earnings it will strengthen the idea that the Microsoft bid is too low, but if earnings are weak it will support Microsoft's efforts to force a Yahoo merger against the will of the current Yahoo board.

Disclosure: Long on YHOO

PageFlakes Low Pageviews & Out Of Gas (cash)

Personalized web page startup Pageflakes is running out of cash and is desperately seeking a buyer reports Gigaom. Pageflakes aggregates RSS feeds and widgets in a customizable AJAX-based personal web page.

Pageflakes has around 1.5 million visitors a month and over 200,000 registered users. However that pales in comparison to their closest pure competitor Netvibes. However, the real competitors are Google's iGoogle, Yahoo's 360, Microsoft and AOL which too offer personalized web pages. The cost of these services is borne by their core offerings.

However, Pageflakes's personalized page is their core offering and it is much harder to monetize. Further to garner premium ad dollars the site needs serious traffic, which costs money. Again the majors can acquire traffic simply by putting up a "tab" to their personalized web page offerings.

According to Gigaom Pageflakes is just the tip of the iceberg and many 2005-2006 consumer web startups that rely of on VCs money will find life increasingly tough once the money stops flowing (See Crash 2.0 Coming). At least Pageflakes has interested buyers, even if they are not big spenders.

Yahoo And AOL Talk Merger

Yahoo and AOL are in discussions to combine their web operations reports the WSJ. The move is aimed at thwarting Microsoft's bid to acquire Yahoo.

The terms being discussed between AOL would fold into Yahoo and make a cash investment in return for about 20% of the combined entity. The deal which does not include AOL's dial-up access business values AOL at about $10 billion. Yahoo would use the AOL cash investment and put up additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share reports the WSJ.

Yahoo To Test Google Ads

Yahoo said it plans to carry search advertising from Google as part of a test that could lead to a broader partnership reports the WSJ. The two-week trial, which will be limited to U.S. traffic and no more than 3% of Yahoo's Web search queries, is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement. Yahoo already had been in negotiations to outsource its Web-search advertising in Europe to Google since last year, say people familiar with the matter.

Citigroup Global Markets analyst Mark Mahaney estimates that Yahoo could boost its cash flow more than 25% annually by outsourcing all its search advertising to Google. Some investors have called for Yahoo to abandon its own search advertising system as a quick way to boost its revenue. Analysts predict that outsourcing its search ads to Google would boost Yahoo's cash flow, since Google's system generates significantly more revenue for each search query than Yahoo does. Under such an arrangement, Yahoo would likely garner a majority of the revenue and Google keep the rest as a commission.

In a press release, Yahoo said "the testing does not necessarily mean that Yahoo will join the AdSense for Search program or that any further commercial relationship with Google will result. " Yahoo CEO Jerry Yang has previously said "We believe having a principal position in both search and display advertising is critical to creating...long-term shareholder value".

Yahoo Gets Into Web Analytics

Yahoo has agreed to acquire IndexTools, a leading provider of web analytics software for online marketing. The acquisition is intended to expand Yahoo's set of services designed to maximize its clients' online marketing efforts.

"Yahoo! believes that the ability to generate the most valuable and relevant insights is essential to seizing market opportunities and creating successful campaigns," said Bassel Ojjeh, senior vice president and head of Yahoo!'s Strategic Data Solutions group. "We expect that the IndexTools' technology platform will provide our customers the opportunity to more quickly uncover and act on these insights, enhancing Yahoo!'s status as a partner of choice in online marketing and the must buy for the world's advertisers."

The acquired technology is expected to extend Yahoo!'s current analytics offerings by adding capabilities to deliver relevant insights and metrics for online campaigns that run across the entire Yahoo! network. Following the acquisition, the first group of customers to benefit from these enhanced tools will be more than 150,000 small-to-medium businesses marketing on the Web with Yahoo!. Additional capabilities enabling third-party developers to monitor and optimize the traffic performance of their applications are expected to follow throughout the year following the acquisition.

Search Engines Must Delete Data Within Six Months

A European Commission advisory body on data protection has said that search engines should delete data held about their users within six months reports the BBC.

The proposed rule specifieds that "Search engine providers must delete or irreversibly anonymise personal data once they no longer serve the specified and legitimate purpose they were collected for."

Google and Yahoo anonymise user data after 18 months and MSN does the same after 13 months. The body said search companies were not "clear enough" on their data protection policy and the recommendation is likely to be accepted by the European Commission and could possibly lead to a clash with search companies. The recommendation could have broader implications such as getting user consent before serving them personalized advertisements.

Peter Fleischer, Google's global privacy counsel, said in a statement: "Google takes privacy incredibly seriously; protecting our users' privacy is at the heart of all our products. It is the reason we were the first company to commit to anonymising our search logs, and also why we dramatically shortened our preference cookie lifetime."

Search engines presently collect and store information every search query such as search term, IP address, browser type, time, and number of clicks. The search engines say this information it required to better serve the user. The advisory body said search engine providers had "insufficiently explained" why they were storing and processing personal data to their users and that personal data of users should not be stored or processed "beyond providing search results". The report also said search engines did not need to gather additional personal data, beyond the IP address of a machine being used, in order to deliver basic search results and advertisements.

The advisory body said, "Search engine providers mention many different purposes for the processing, it is not clear to what extent data are reprocessed for another purpose that is incompatible with the purpose for which they were originally collected". Thus search engines should not use personally identifiable data to improve their services or for accountancy purposes. Nor should personal data stored for security purposes be used to improve services and if search engines enriched personal data about users from third parties they could be breaking the law unless customers had given explicit consent. It said users should have the right to access, inspect and correct all the personal data about themselves held by search engines, including their profiles and search history.

The report issued a set of obligations to search engines firms, including:

• Search engines should get informed consent from users if they correlate personal data across different services, such as desktop search
• Search engine providers must delete or anonymise (in an irreversible and efficient way) personal data once they are no longer necessary for the purpose for which they were collected
• Personal data should not be held by search engines for longer than six months
• In case search engine providers retain personal data longer than six months, they must demonstrate comprehensively that it is strictly necessary for the service
• It is not necessary to collect additional personal data from individual users in order to be able to perform the service of delivering search results and advertisements
• If search engine providers use cookies, their lifetime should be no longer than demonstrably necessary
• Search engine providers must give users clear and intelligible information about their identity and location and about the data they intend to collect store or transmit, as well as the purpose for which they are collected

Yahoo Unveils Smart Mobile Search

Yahoo announced a new mobile search strategy for Yahoo OneSearch at the CTIA Wireless trade show.

Marco Boerries, executive vice president of Yahoo OneSearch said users will get "instant answers to any query, not just web links." This means that search results will expand from traditional hyperlinks into other media. A search for "New York" could yield subway schedules, for example, or a search for local sushi restaurants could bring up available reservations.

OneSearch will be incorporating voice-enabled technology similar to GOOG411. "Consumers can search for anything, including flight numbers, locations, Web site names, local restaurants, and more, by simply speaking," according to a report put out by Yahoo. More>>

Yahoo Launches Womens Web Site "Shine"

Yahoo has launched a web site called Shine targeted at women between ages 25 and 54. The site brings together content from other smaller sections of Yahoo, with original content and syndication deals with the likes of Conde Nast, Hearst, Rodale, Time Inc and others. The content will be focused in nine specific categories: Fashion & Beauty, Food, Healthy Living, Work & Money, Love and Relationships, Parenting, At Home, Entertainment & Culture, and Astrology.

Yahoo reports 40 million women come to the their web site each month and Shine presents an opportunity to serve targeted content that is of interest to women and presents a lucrative opportunity for advertisers looking to connect with women.

Shine competes with site like of iVillage, Glam Media and Sugar Publishing among others.

Yahoo Homepage Redesign

Yahoo has made a change to its homepage which can be considered fairly significant. The internet portal has moved their logo from the left to the center of the page. The logo now sits atop the search utility defying convention. This is kinda like the Google.com classic homepage, however, that's all Google has on that page - the logo and search box. The personalized Google homepage, however, has the logo to the left of the search text field as the page can potentially have a lot of content depending on which gadgets the user adds.

Yahoo's header height appears roughly about the same height as when the logo was to the left, the search text field is longer, and there is a clear "Search" label to the left of the text field in addition to their "Web Search" button label. Not sure I personally care for the new positioning of the logo as I feel it tends to clutter the search utility rather than draw attention to it which is what I am guessing Yahoo was aiming for. Yahoo has previously waffled on this issue and flip flopped the logo from the middle and then to the left and now back to the middle. The previous redesign from Yahoo was circa mid '06.

BEFORE:


AFTER:

Open Social Foundation Launched By Google, Yahoo, Myspace

A new social networking alliance will include internet powerhouses Google, Yahoo, and Myspace in an "Open Social Foundation". Facebook's absence from this list is something of a social networking elephant in the room as Facebook is generally considered the key innovator and eventual market leader in the social networking space.

The Open Social Foundation will, according to the Yahoo Press release today, work to ensure:

... the neutrality and longevity of OpenSocial as an open, community-governed specification for building social applications across the web...

The foundation will provide transparency and operational guidelines around technology, documentation, intellectual property, and other issues related to the evolution of the OpenSocial platform, while also ensuring all stakeholders share influence over its future direction.

In short, Open Social is working towards a social networking environment that spans the internet, sharing information across platforms and websites rather than confining social networking information to a specific standard or a particular online environment.

Facebook has also created tools for the integration of information with other sites and routines, but generally Facebook is considered to be a less open online environment than the type envisioned by Open Social advocates. With Facebook the user tends to socially interact within Facebook itself, where with Open Social you will be able to access social networking functions from any sites that have adopted the Open Social platform.

Silicon Valley Company Demographics

LinkedIn, the social network mostly inhabited by technology professionals, now offers a great feature that allows you to explore various features of the linked in crowd such as company affiliations, age, and years at a company.

This led Louis Gray to create this excellent graph:


Most interesting to me was the very low tenure time at Google, though this may reflect a large number of new hires rather than people leaving the company. However even established titans like Microsoft and Apple appear to have something of a revolving door where people are jumping and climbing aboard other big ships at a surprising pace.

Google's February Search Queries Decline 5%

In February, Google Sites extended its share of core searches to 59.2 percent, up from 58.5 percent the previous month. Yahoo! Sites ranked second with 21.6 percent, followed by Microsoft Sites (9.6 percent), AOL LLC (4.9 percent), and Ask Network (4.6 percent).

comScore qSearch 2.0 Report - Total U.S. Home/Work/University Location

Share of Searches (%)

Search Entity                Jan-08        Feb-08      Jan vs. Feb
Total Core Search            100.0%        100.0%         0.0
Google Sites                  58.5%         59.2%         0.7
Yahoo! Sites                  22.2%         21.6%        -0.6
Microsoft Sites                9.8%          9.6%        -0.2
AOL Network                    4.9%          4.9%         0.0
Ask Network                    4.6%          4.5%         0.1

* Based on the five major search engines including partner searches and cross-channel searches. Searches for mapping, local directory, and user-generated video sites that are not on the core domain of the five search engines are not included in the core search numbers.

Americans conducted 9.9 billion searches at the core search engines, representing a 6-percent decline versus January. Each of the five core search engines experienced search query declines as a result of February being a seasonally soft month for overall search activity. Google Sites saw more than 5.8 billion core searches, followed by Yahoo! Sites with 2.1 billion, and Microsoft Sites with 953 million.

comScore qSearch 2.0 Report - Total U.S. Home/Work/University Location

Searches Query Volume by Site

Search Entity                Jan-08        Feb-08      Jan vs. Feb
Total Core Search            10,492         9,882        -6.0%
Google Sites                  6,139         5,855        -5.0%
Yahoo! Sites                  2,332         2,136        -8.0%
Microsoft Sites               1,030           953        -7.0%
AOL Network                     514           488        -5.0%
Ask Network                     475           450        -5.0%

* Based on the five major search engines including partner searches and cross-channel searches. Searches for mapping, local directory, and user-generated video sites that are not on the core domain of the five search engines are not included in the core search numbers.

Source: comScore

Web 2.0 Bubble Bursting - Crash 2.0 Coming

Dow Jones VentureSource released a report on venture capital investment in Web 2.0 companies Tuesday saying that "investment boom may be peaking."

A total of 178 deals received $1.34 billion in 2007, an 88% increase over 2006. Of that Facebook received $300 and Ning.com received $44 million. The rest of the distribution does not look too good from there. Venture capital investment has been sustaining many Web 2.0 startups, which are often chasing the same users. When the money dries up so will most Web 2.0 companies unless they find a new source of revenue.

U.S. Web 2.0 Investment by Region, 2006-2007

                         2006                           2007
              Deals     Investment (MM)      Deals     Investment (MM)
                     
Bay Area              74         $431               72*         $721*
New England           15         $79                20          $158
Southern California   10         $41                14          $115
New York Metro         9         $18                25           $58
Pacific Northwest      6         $35                13          $140
Southeast              6         $24                 7           $47
Mountain (CO, AZ, UT)  4          $7                 7           $31
Texas                  3         $10                 2            $4
North Carolina         2          $3                 2           $10

*Includes Facebook

"The beauty of Web 2.0 companies is that they can do so much with so little. A few million dollars and they're not only up and running but attracting eyeballs and advertisers. 2008 may be a make-or-break year for many Internet companies with business models relying on advertising. The slumping economy, coupled with a slowdown in click-through rates for online advertising, is going to pose a real challenge to their ability to generate revenues and position themselves for an exit," said Jessica Canning, director of global research at Dow Jones VentureSource.

Web 2.0 Bubble Bursting - Part 1

Yahoo to Microsoft - We Are Worth $40 Per Share

Yahoo initially spurned Microsoftś offer of $31 per share arguing that it was far too little and that a merger was not in the interest of Yahoo shareholders. Jerry Yang, in a letter to shareholders about a month ago, vaguely outlined his vision of a Yahoo that would improve in the coming years. The Yahoo improvement plan has now been articulated in much greater detail along with assumptions about new revenue coming from advertising and expansion of Yahoo properties. Lots of new revenue claims Yahoo. Leading tech market watcher Henry Blodget provides an excellent financial breakdown here. Henry is skeptical of the assumptions but agrees that if they are accurate then Yahoo is indeed worth $40-50 per share.

I see this move as something of a Hail Mary pass to stave off a merger, with the added bonus of trying to justify another few dollars increase on the bid from Microsoft before what now appears to be a very likely takeover of Yahoo. Shareholder discontent is high enough that Microsoft need not do much to win a proxy fight with the existing Yahoo board.

Disclosure: Long on YHOO

Google vs. Microsoft, Yahoo edition

As Microsoft´s merger with Yahoo becomes increasingly likely, Google is continuing to make their concerns public. Speaking in Beijing, China, Google CEO Eric Schmidt said:

"We are concerned that there are things Microsoft could do that would be bad for the Internet,"

Schmidt did not elaborate on this concern, which has also been expressed by Google in many other venues. Clearly however Google worries that the combined Yahoo Microsoft might use Microsoftś browser and operating system dominance to route traffic to their own sites and searches and away from Google, which is still the search engine of choice for the overwhelming majority of internet users.

Reuters Report

Disclosure: Long on YHOO

Flickr Video by April

Flickr, Yahoo's popular and successful photo sharing site, will provide Video sharing by April. Dan Farber reports on his interview with Flickr Co-Founder Stewart Butterfield, who along with his wife Caterina Fake and their staff developed Flickr several years ago as a supportive service to their game development and wound up focusing exclusively on the photo sharing capabilities. Yahoo purchased Flickr from them for a reported sum of about 20 million, which by today's standards may make Flickr one of the greatest Web 2.0 undervaluations in history.

Video sharing in a socially networked environment is definitely on the radar screens of all the major players despite the fact nobody has figured out how to monetize it. YouTube remains the key player in the space, serving up 1 of every 3 online videos. However Flickr entry into this market may have an impact, as Flickr enthusiasts tend to represent many developers and early adopters in the online space. That said, Yahoo's challenges in the recent launch of Yahoo Live service may indicate they'll have trouble making a dent in YouTube's video dominance.

Disclosure: Long on Yahoo

Google - Invasion Of The Ad Snatchers?

Google's adwords and adsense pay per click juggernauts appear to be sucking the life out of old media says stock watcher Henry Blodget, author of the Silicon Alley Insider technology stock blog.

Blodget noted that online advertising is flowing online at a "frantic" rate, and Google captured twice as much of the new revenue as its closest three competitors combined.

Where offline advertising increased by about a billion from 2006 to 2007, online ad spending increased 4 billion with Google scooping up a whopping $2.7 billion of that $4 billion increased spend. As Blodget notes about a third of Google's revenues are from its relationships with publishers who use Adsense to run Google ads on their own properties, so some of that 2.7 billion is shared with the tens of thousands of large and small publishers in Google's advertising stable.

Google's powerful dominance in the online advertising space will be enhanced with the DoubleClick acquistion, although it remains to be seen if Google can monetize display advertising as successfully as it has monetized per click advertising -in many ways revolutionizing the industry with the success of the pay per click model. Ironically Google was not the inventor of this pay per click model that is rapidly making Google the most successful technology company in history.

Most credit the invention of the pay per click ad to Bill Gross and his startup GoTo.com which was soon renamed to Overture.com in a Disney trademark dispute and then Overture was acquired by Yahoo.

Yahoo: We Are Open For Developers

Yahoo has just announced an expansion of what it calls the Yahoo Search "Open Ecosystem".

Yahoo has been a leader for some time in the Web 2.0 space with several applications and innovations such as photo site Flickr and adoption of OpenID. Recently Yahoo opened up their search application for more customization by developers.

Today's announcement marks a stronger level of committment to new standards that will support the growth and development of the semantic web through the adoption of microformats - basically formats that help standardize the way applications can interact with data. Yahoo is supporting microformats including hCard, hCalendar, hReview, hAtom, and XFN

As we noted in a recent post about Tim Berners-Lee's vision of the future, the promise of the semantic web is extraordinary as it allows for richer, more helpful, and more navigable relationships between the billions of pieces of information flowing online every day.

Developers will also want to look for Yahoo's soon-to-be-announced beta program to build "enhanced results applications" using Yahoo search, not to mention the developer launch party hosted by Yahoo at their Sunnyvale headquarters.

Diclosure: Long on Yahoo

AOL Buys Bebo For $850 Million

AOL is about to acquire Bebo for $850 million. AOL announces the Bebo acquisition. Bebo is the the third place Social Network in the US and far behind both Myspace and Facebook, but it is the first place social network in the British Isles and Second in New Zealand.

Based in London and begun in 2005, Bebo lists these features as major aspects of the Bebo philosophy of social networking:

Open Media: Open Media gives media companies free and open access to Bebo's users worldwide and the Bebo community free and open access to thousands of hours of premium entertainment content from some of the world's best known media brands.

Open Social: In November 2007, Bebo announced that it is joining OpenSocial, a set of common APIs for building social applications across the web. In addition to this Bebo announced plans for a Developers Platform.

Most analysts argue that AOL's internet prospects have been declining for some time, and this move is likely to breath some life into the sagging AOL empire. This also may suggest that AOL and Yahoo are now extremely unlikely to merge given the size of this deal. CNBC has more about this deal and how it might affect the proposed Microsoft takeover of Yahoo.

News Corp: "Not going to get into a fight with Microsoft" over Yahoo

Yahoo's chances of eluding a Microsoft aquisition dimmed today after comments by Rupert Murdock, chief of News Corp who said:

We're not going to get into a fight with Microsoft, which has a lot more money than us,"

Yahoo has been working very hard to avoid a Microsoft takeover, with CEO Jerry Yang stating in a recent letter to shareholders that Yahoo feels the Microsoft offer substantially undervalues Yahoo. However many market watchers see the takeover as very likely, either by eventual capitulation of the current Yahoo board or by their replacement in a proxy battle that Microsoft seems likely to win.

Today's statement from News Corp is another nail in the CEO coffin that Microsoft appears to be building for Yang and at least some of the current Yahoo board members.

Disclosure: Long on Yahoo

Ozzie to Om - Microsoft on the shifting Microsoft landscape

Om Malik has a piece today detailing his discussion Microsoft's future with Ray Ozzie, one of microsoft's key players and probably the key architect of overall online strategies for Microsoft.

Here is the interview at GigaOM.

Microsoft is in a difficult business position now as many applications and many major online projects are moving off of desktops and local servers and into cloud computing services such as that offered by Amazon.com, which Ozzie compliments as the first major effort in the utility computing space.

Microsoft appears to be moving powerfully into cloud computing, though it was also notable at this year's Computer Electronics Show (CES) that Microsoft was also advertising the
"home servers" as a small business solution.

To date, Microsoft's internet success stories are few and far between, and they are watching Google eat and serve a lot of free lunches. As the competition heats up with the likely merger of Microsoft and Yahoo, a lot of change could happen very fast.

U.S. Searches For February 2008

Hitwise, just released searches traffic for February 2008. Google accounted for 66.44 percent of all U.S. searches in the four weeks ending February 23, 2008. Yahoo! Search, MSN Search and Ask.com each received 20.59, 6.95 and 4.16 percent respectively. The remaining 46 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.87 percent of U.S. searches.

Percentage of U.S. Searches Among Leading Search Engines
Domain              Feb.-08       Jan.-08        Feb.-07
www.google.com      66.44%        65.98%         63.90%
search.yahoo.com    20.59%        20.94%         21.47%
search.msn.com       6.95%        *6.90%         *9.30%
www.ask.com          4.16%         4.21%          3.52%

Note: Data is based on four week rolling periods (ending 2/23/08, 1/26/08; 2/24/07) from the Hitwise sample of 10 million US Internet users.
* - includes executed searches on Live.com and MSN Search.
Source: Hitwise

Silicon Valley / Tech's Highest Paid

Vanity Fair just released "Windfall Report", which lists the Top 50 money makers in the U.S. for 2007. Here is of money makers in Silicon Valley / Tech.

Microsoft (MSFT) Chairman Bill Gates: $2.8 billion
Oracle (ORCL) CEO Larry Ellison: $1.1 billion
CDW Founder Michael Krasny: $970 million
News Corp. (NWS) CEO Rupert Murdoch: $960 milion
Microsoft (MSFT) co-founder Paul Allen: $775 million
Google (GOOG) CEO Eric Schmidt: $600 million
Charles Schwab Founder Charles Schwab: $385 million
Viacom (VIAB) CEO Sumner Redstone: $362 million
Right Media (YHOO) CEO Michael Walrath (sold to Yahoo): $340 million
IAC (IACI) CEO Barry Diller: $300 million
aQuantive (MSFT) Founder Nicolas Hanauer (sold to Microsoft): $282 million
Google (GOOG) Founding Member, Ram Shriram: $272 million
KPCB Venture Capitalist John Doerr: $250 million
Star Wars' Producer George Lucas: $200 million
Covansys (CSC) Founder Ray Vattikuti: $195 million
Salesforce.com (CRM) CEO Marc Benioff: $190 million

AOL Yahoo Talk Merger

The Wall Street Journal is reporting that Yahoo and AOL's parent Time Warner have stepped up talks over creating an alternative to Microsoft's and Google. The talks center on a deal that would fold Time Warner's AOL Internet unit into Yahoo. If the merger is successful and executed well it could be a strong alternative to Google & Microsoft.

AOL has been organizing all their advertising divisions into a single unit to better compete with Google (GOOG), Microsoft (MSFT), Yahoo (YHOO) and ad networks such as Facebook and MySpace. (NWS).

Yahoo Launches Mobile Content Tool

Yahoo announced today the impending launch in Q2'08 of onePlace, a mobile content management tool to enable consumers to better manage the wide selection of content available across the Internet. Yahoo! onePlace is expected to become available across hundreds of devices and mobile browsers globally.

"Yahoo! onePlace(TM) will bring together a consumer's interests, passions and important information into a single location - creating a rich and highly personalized experience. Everything is instantly organized, dynamically kept current, and served to them the way they want. So now, the content they consume and the way they consume it will be hyper-customized to their specific preferences and tastes."

onePlace will provide personalized views, dynamic content updates, and a mobile RSS reader. Users will be able to bookmark content online, keep it automatically updated with the latest updates, and assign categories and tags - or placed into customized "collections" that consumers create.

January Search Rankings

In the January 2008 analysis of the Top 50 properties worldwide where search activity is observed, Google Sites led with 7.7 billion searches. Yahoo! Sites ranked second with nearly 2.5 billion searches, followed by Microsoft Sites (1.1 billion), and AOL LLC (903 million).

comScore Expanded Search Query Report January 2008 Total U.S. – Home/Work/University Locations Source: comScore qSearch 2.0
Expanded Search Entity	Search Queries (MM)
	Dec-07	Jan-08	Percent Change
Total Expanded Search	13,523	14,595	7.9%
Google Sites	7,165	7,735	8.0%
Google	5,651	6,181	9.4%
YouTube/All Other	1,514	1,554	2.6%
Yahoo! Sites	2,363	2,456	3.9%
Yahoo!	2,326	2,427	4.3%
All Other	37	29	-21.6%
Microsoft Sites	963	1,060	10.1%
MSN-Windows Live	927	1,024	10.5%
Microsoft/All Other	36	36	0.0%
AOL LLC	N/A	903	N/A
AOL	N/A	522	N/A
MapQuest/All Other	N/A	381	N/A
Ask Network	416	477	14.7%
Ask.com	238	286	20.2%
MyWebSearch.com/ All Other	178	191	7.3%
eBay	508	467	-8.1%
Fox Interactive Media	350	384	9.6%
MySpace	342	376	9.9%
All Other	8	8	0.0%
Craigslist.org	220	256	16.4%
Amazon Sites	215	167	-22.2%
Facebook.com	102	109	6.2%

Source: comScore

Web 2.0 Bubble (Bomb 2.0) Is Bursting

ZDNet has a great article comparing the events that lead to the bursting of of the first internet bubble (Dot Com Bomb) to the bursting of the Web 2.0 bubble called Bomb 2.0. The article suggests that Bomb 2.0 is underway. Google is down 27% since the start of the year. Just as Time-Warner set off Dot Bomb 1.0 by acquiring AOL, Microsoft may have set off the second through its bid for Yahoo. More>>

Microsoft - Follow The Money

Microsoft's bid for Yahoo is all about online advertising. Steve Ballmer, Microsoft's CEO has said that in a few years online advertising will account for as much as 25% of Microsoft's revenue. Ballmer is hoping that acquiring Yahoo will help Microsoft catch up to Google. However, acquiring Yahoo will not give Microsoft the revenue nor the search market share it is seeking for, as Yahoo's strength is in display advertising not search advertising.

Microsoft Seven Times Bigger Than Google
Microsoft's share of the display advertising market is already about 7 times larger than Google's. Yet, Microsoft's online business racked up a loss of $248 million during the quarter ending in December 2007. Microsoft and Yahoo combined will have a market share of about 25% versus Google's 1%.

Where The Money Is
Google accounted for 65.98% of U.S. searches, while Yahoo and Microsoft combined accounted for 27.84% of U.S. searches in January 2008. It is search advertising that is propelling Google. The revenue that Microsoft is seeking is in search advertising not in display advertising which the Yahoo purchase brings.


Focus On Search
Microsoft should be looking to really acquire Yahoo's search and related advertising business as that is where the growth is. Display is experience some softness in pricing as more and more and networks spring up daily targeting niche verticals. However, in the long run Microsoft should benefit for Yahoo technologies and properties that are strong in display as that is where users will be hanging out. Further Microsoft's relationships with Facebook and Digg should add to this. Hence that is why Google is busy working on applications and initiatives such as Open Social that will keep users hooked on Google.


Image Source: Forbes

Yang to Yahoos - Keep The Faith?!

Henry Blodget over at Silicon Alley Insider has a good summary of Jerry Yang’s Yahoo note to the troops articulating the reasons for the rejection of Microsoft’s offer and the company’s future plans. He gives Yang an A- but I'm not sure this is the kind of rallying cry these guys need right now.

I’m wondering if Yahoo's big failure happened many years ago when many lines of separation were drawn between technologists and most of the company management. I assume there were official lines drawn, but I’m talking more in terms of cultural differences.

For some contrarian investors bullishness about Yahoo rested on the assumption that the technologists would eventually have their day at Yahoo. The idea was that Yahoo has already created many great tools necessary to keep Yahoo competitive and interface with the broader developer community. Yahoo in theory could quickly bring far more awareness and use of Yahoo tools, effectively widening their footprint over the internet landscape. The Yahoo bulls also suggested that monetizing of traffic would improve, giving Yahoo a huge boost in profits given that historically Yahoo makes less than half as much as Google does per search.

What I'd like to know from Jerry is the plan for rapid technological empowerment at Yahoo. The kind of empowerment that keeps people working until the wee hours on projects that excite them and show great potential for company profits. ie the kind of empowerment Google's done with their folks.

It will take a LOT more than peppy emails and a combative stance to save Yahoo. The buzz from insiders and recent defections from Yahoo suggest that even internally Yahoos are more bullish about Google than they are about own company.

So, if we assume Yahoo has got to change course in a big way would Microsoft or News Corp be the best fit? From Yahoo’s perspective it appears they would jump on any deal where News Corp was willing to pony up as much as Microsoft. In many ways this seems like a more likely winning combination than Microsoft and Yahoo which would have a lot of initial, and perhaps long term, contentiousness.

Fox Interactive is run brilliantly, and applying these management principles to Yahoo could do a world of good to the bottom line of the combined company. Yet it will be difficult for News Corp to make the case that Microsoft isn't offering enough for Yahoo, especially when Microsoft ups the offer to about $35 per share as many think they will do soon. This would be a premium of almost 100% on Yahoo's pre-merger-news price of about $18 per share. Although the Yahoo board may stand firm and reject the offers, Microsoft is probably going to make an offer that Yahoo shareholders can't refuse.

Long on Yahoo

AOL's Transforming To Ad Network

AOL’s continues to build out advertising unit announcing two more purchases recently. Its advertising unit beat expectations when earnings were reported while operating income for its subscriber unit dropped 70% due to the sale of its internet access business in Great Britain and France.

Last week Time Warner's new CEO Jeff Bewkes, announced the company is looking at possibly shedding the traditional dial-up business, the company's cable unit and possibly spinning off its advertising business.

The company is organizing all their advertising divisions into a single unit to better compete with Google, Microsoft, Yahoo and ad networks such as Facebook and MySpace. The former CEO of TACODA, Curt Viebranz, will head the division.

Here is a list of their advertising acquisitions to date:

* Feb 2008, Buy.At, online affiliate marketing network
* Feb 2008, Goowy, widget creator
* July 2007, TACODA, behavioral targeting ad network
* May 2007, ADTECH AG, ad-serving and e-mail marketing network
* May 2007, Third Screen Media, mobile ad serving
* May 2006, LightningCast, streaming video/audio ad serving
* June 2004, Advertising.com, direct-response network

Potential suitors for the dial-up unit could be AT&T and Comcast for the cable business which includes TNT, TBS and others. No ideas what happens to CNN. Possibly it gets folded into its new advertising unit as a publisher.Bewkes, said that Microsoft’s Yahoo bid “demonstrates the value” of AOL, since Yahoo is a competitor of AOL.

YaFoxHoo? News Corp may bid against Microsoft for Yahoo

Many news sources are now reporting that serious talks may be underway between Yahoo and Myspace / Fox parent corporation News Corp.

Tech reporter Jessica Vascellaro at WSJ notes:

The deal would allow Yahoo to remain independent while giving News Corp. substantial control over a huge array of Internet properties and advertising opportunities.

News Corp is already a key internet player because they own Myspace and many Fox properties that have huge online visitation. Thus they could leverage the Yahoo aquisition to some advantage, perhaps through monetization optimizing, cross promotion, and other management efficiencies that could come with a merger.

The offer from News Corp is rumored to be in the ballpark of 50 billion dollars, which is about he same as the anticipated counter-offer from Microsoft after Yahoo rejected Microsoft's 46 billion dollar offer earlier this week.

Given equal offers it is very likely the Yahoo board will choose News Corp over Microsoft.

Disclosure: Long on Yahoo

Yahoo Acquires Online Video Ad Company

Yahoo is acquiring Maven Networks for US$160 million. Maven, is an online video ad insertion company. Their clients include Fox News, CBS Sports, Hearst, The Financial Times and Gannett.

Maven’s technology identifies the right moment during a video to show a specific ad. Yahoo will integrate the technology in video as clickable ads, interactive ads and short clips. According to Yahoo these formats have proved far more effective than preroll ads, which are ads that appear before the content the viewer is trying to see.

“We really see this deal with Maven as creating one of the most robust video platforms in the industry,” said Hilary Schneider, an executive vice president who oversees Yahoo’s network of advertisers and publishers.

Online advertising accounted for about $US775 million of the US$20 billion spent on online advertising in the United States in 2007 reports eMarketer.

Google Still Tops Search - Ask.com Gaining

How did the top four search engines perform in the first 4 weeks of the year? Data from Hitwise shows that Google accounted for 65.98% of all US searches. Yahoo followed with 20.94%, MSN Live Search at 6.9%, and Ask trailing at 4.21% which reflects an increase of 19% YOY.

"Search engines remain the primary way internet users navigate to key industry categories" according to Hitwise. Interesting growth trend is that travel, news and media, entertainment, business and finance, and sports all underwent significant increases in the share of traffic coming from search engines, from Jan'08 to Jan'07.

Google to Yahoo - Beware the Microsoft Poison!

Google is concerned that Microsoft could poison Yahoo with an aquisition, making the combined company less open, a state of affairs Google feels is key to the internet environment and was key to the sucess of Yahoo and Google.

It is easy to be sympathetic to the idea of openness and transparency as core values, but I would suggest that Google has more than enough internet opacity in their search ranking practices to make me skeptical of all their whining about how Microsoft won't play fair if they get a foothold in the search game.

It is true that Google has been more open than most companies, but they are still far less responsive to ranking problems and search issues than they should be. To the extent MS + Yahoo brings more competition to the space it might help Google see the light and practice more of what they preach about transparency. (A quick example of the lack of transparency - Google does not share with publishers the advertising revenue share for a publisher's own website. This would be a totally unacceptable practice offline but reflects the huge control Google now exerts over internet content and search monetization.

Meanwhile, Henry Blodget has some great advice for Yang and Balmer, but it’s clear to me that neither party will view things this broadly. I think there is only small difference in the IT worldview of management at Yahoo and Google, but a world of difference with Microsoft.

The contest for Yahoo is a fascinating situation because up until now Google has been very happy to watch Yahoo whither on the search vine. Now Google needs to consider a powerful partnership as a defensive attack on the Microsoft search potential after an aquisition.

Disclosure: Yahoo Shareholder : )

Microsoft + Yahoo > Google?

Most of the commentary about the possible Yahoo Microsoft merger from inside the internet community is very skeptical of the prospects of a merger, where most of the investment commentary from Wall Street seems to be positive although Microsoft shares lost enough value that clearly the broader investment sentiment about this is negative.

I'd suggest that Robert Scoble is right, and the Yahoo Microsoft deal is probably a good idea. Although Yahoo is in some ways a different culture from Microsoft, It seems to me that both of those corporate cultures have become bureaucratic, sluggish, and uninspired when compared to Google’s freewheeling yet very productive approaches. However, the majority of the thousands of Yahoo and MS employees are very impressive individuals, and certainly capable of great things as the online world is reinvented on a regular basis.

If Microsoft can pool the innovations of their excellent online efforts in the LIVE project with Yahoo’s superb developer support programs, and hire and inspire more people to have the evangelical zeal of Googlers, it could be a whole new online ballgame.

A big reason this could make sense for Yahoo and Microsoft is the online math. The traffic from Yahoo+ Microsoft is very substantial. By many measures Yahoo actually has more total traffic than Google already - it just does not have as much of the lucrative search traffic and does not monetize the traffic as well as Google. With Microsoft traffic, the combined Yahoo Microsoft company will still initially lag Google in search traffic, but it will have *far greater* total web traffic.

A fear of lawsuits over browser manipulations and lack of interest in what for Microsoft was a small revenue source led them to failure in the search business. Although the LIVE project was inspired, search share still lags so far behind Yahoo and Google that rolling all this into Yahoo search makes a lot of sense if Microsoft want a a piece of the online action they now see as critical to their success. The combined company would control an enormous share of global web traffic, and it won’t take too much imagination or innovation to redirect this traffic more profitably than now.

Microsoft remains the overwhelmingly huge legacy player in the information technology space. Google is the clear leader as the new player. Can Yahoo inject enough energy into the monstrous Microsoft machine to compete effectively in the online space? I think there are many potential pitfalls, but on balance you need to do the math, which says that in online footprint, content, and market capitalization:
Microsoft +Yahoo > Google.

News release from Microsoft

Disclosure: I'm a Yahoo Shareholder

Verisign CTO Now Yahoo CTO

Verisign's former CTO Aristotle Balogh is Yahoo!'s new CTO. He replaces former CTO, Farzad Nazem, who resigned in June. Balogh who will report to Jerry Yang and will lead Yahoo's global engineering organization and manage all the company's technology operations.

Yahoo also announced a new multi-year advertising agreement with AT&T and a 1,000 job cuts.

OpenID Experts at Web 2.0 Conference

If you are interested in OpenID, OAuth, OpenAuth and related technologies, come hear the high-powered panel on this subject at the WebGuild's Web 2.0 Conference and Expo at the Santa Clara Marriott on January 29, 2008.

The distinguished panelists will be:

• Johannes Ernst, Founder & CEO, NetMesh
• George Fletcher, Chief Architect Identity Services, AOL
• John Panzer, Technical Lead Manager, Google
• Nico Popp, VP, Authentication Services, VeriSign
• Shreyas Doshi, Sr. Product Manager, Identity Products, Yahoo! Inc.

The panel will begin at 1:45 PM and will be exploring whether these technologies are ready for prime time and what's coming, why Google, Yahoo!, AOL and VeriSign have implemented what they have already, and what's in it for you as a web developer or web business.

If you have questions you'd like to ask the panel post them here.

Yahoo To Layoff 20% of Workers

CNET and others are reporting that Yahoo will be laying off over 20% of it workforce. This represents 1,500 to 2,500 jobs of its 12,500 workforce. The cuts are speculated to be mostly of the company's European operations. Many consider this a step in the right direction to re-focus the company. This is, of course, also happening across many other tech companies in the Valley.

Is A Yahoo! Takeover Imminent?

Last year when I met Terry Semel, Yahoo’s CEO, and asked him if a Yahoo takeover by Microsoft was inevitable, he looked at me as if he had swallowed a frog. This week at CES, Joe Hunkins asked David Filo, Yahoo’s co-Founder, the same question and if he had met with Bill Gates, Microsoft’s Chairman & Founder, to which Filo responded he had not. However, the evidence seems to be mounting to the contrary and rumor mills are gathering speed. Is this all baseless? Let's examine.

Microsoft, which is a distant third in the search market has outwardly stated that it has ambitions to be the leader in the domain. According to the latest Hitwise report of U.S. Searches (Dec 2007), Google continues to dominant with a 65.98% share, Yahoo follows with 20.88%, and Microsoft lags behind with 7.04%.

Microsoft’s Reality
There is simply no way Microsoft can close this gap organically. Hence, Microsoft has been coming at it from all angles such as the Facebook investment, which I thought a mistake (this week Bruce Jaffe, Chief Acquisition Officer, Microsoft left the company), the acquisition of Fast Search & Transfer this week and aQuantive earlier this year. The company was so eager to respond to Google’s foray into text to speech service 1-800-GOOG-411 that they spent a US$1 Billion to purchase Tellme. Tellme is a really a call center automation service not a text to speech service based on a web crawl as 1-800-GOOG-411.

The bottom line is Microsoft needs a major boost in search traffic to flow through its search property LIVE.com to challenge Google’s lead. The quickest and only way to achieve this would be an outright acquisition of Yahoo. This would give Microsoft 28% of the U.S. search market share, which is still less than 50% of Google’s U.S. search market share, but sufficient enough to be considered a formidable competitor.

Yahoo!’s Reality
Yahoo shares are trading near 52-week lows, giving it a market capitalization of approximately $31 Billion. However, this does not include the value of Yahoo’s investments such as Yahoo Japan, Alibaba.com and Alibaba Group. According to Valleywag, Yahoo Japan, of which Yahoo owns a third, is worth $25 Billion, putting Yahoo's stake in it at nearly $9 Billion. Alibaba.com, a Chinese e-commerce company in which Yahoo directly owns a 10% stake, is worth approximately $17 Billion, putting Yahoo's stake at about $1.7 Billion. Yahoo also own a 40% stake in Alibaba.com's parent company, Alibaba Group, which runs Yahoo China, which has an estimated of $8 Billion and $16 Billion. Yahoo has other investments like G-Market.

Based on the above calculation the combined value of Yahoo’s investments add up to over US$15 Billion. The current valuation of Yahoo based on the Nasdaq listing does not fully reflect Yahoo’s investments, which if realized would give Yahoo a valuation upwards of US$45 Billion.

Right Timing
Microsoft would be wise to take a run at Yahoo at the current valuation, acquire the traffic to fuel Microsoft’s search and advertising properties, become a formidable competitor to Google and possibly make realize a 50% return on its investment just by unearthing the full value of Yahoo’s investments.

CES 2008 - Yang & Filo on Yahoo's Future

Jerry Yang spoke about Yahoo a few hours ago, and I'd have to say the talk was lackluster given the amount of attention the markets are paying to Yahoo leadership right now, and given the slick Gates keynote of yesterday. (C’mon Jerry - no Guitar Hero action?).

Yahoo spent a lot of time talking about and “introducing” Yahoo Go” Version 3, a product I that I think is not all that familiar even in many "insiders", but Jerry treated Yahoo Go as if it was a household word.

Yahoo Go did look neat - a lot like the MS mobile phone innovations shown yesterday which also offer excellent info+browser+mapping+data integration for phones.

Also announced was an expansion of mobile and widget platforms to make them more “open” and therefore more appealing to developers, though I’m not clear how significant this will be. In my opinion Yahoo does a brilliant job innovating for developers and then fails to "get the word out".

Yahoo, like Microsoft yesterday, noted that they are looking at *billions* of mobile users and that although PCs are still important to them it’s clear that mobile is the bright and shining star where innovation will be happening.

After the talk I had a chance to interview co-founder David Filo, who had just come in for a few comments at the end of the talk and was hanging around afterward. Like many Silicon Valley elites David was engaging and personal.

Filo confirmed that David’s plans are to ease out of some of his technology management roles at Yahoo while Jerry’s intention is to stay engaged into the foreseeable future as CEO. When Terry Semel left the company it was often suggested that Yang would not stay long and would be more of an interim CEO, but those rumors appear to have been unfounded.

I asked David if he’d met with Bill Gates during CES. He said “I haven’t”, which leads me to my current working hypothesis which is a little wild, but that’s what blogging is for!

The hypothesis is that the Gates Keynote last night and the Yang talk this morning were not coincidental, but were the result of meetings - probably last night - between Gates, Yang, and perhaps former Yahoo CEO Terry Semel. I’ll certainly take David at his word that “he” did not meet with Gates. Semel was *in the audience* this morning but was not introduced.

I should note that when I pressed David to talk about a potential merger he suggested he feels Yahoo has a lot to do themselves before moving in that direction, but he also noted how the industry moves in fast and furious ways. He actually asked *me* what the advantage would be to that. I’ve written about that before here at the blog but in short it’s that Yahoo+MSN would be able to fight Google in ways neither appears to be able to do alone.

So I’m not predicting a merger/buyout but I sure wouldn’t rule it out, and I’m guessing there are informal talks going on - probably here at CES.

Disclaimer: I’ve got some Yahoo Stock. Not that it’s making me any money mind you, but I’ve got some.

Yahoo Picks! Shutting Down

Yahoo! Picks in its "irreverent look at the best of the Web" as described on Yahoo is now no longer relevant. The site which was quite popular in the early years is shutting down. Picks features sites with reviews of each.

Message on the site:

We're sorry to say that Picks has stopped updating. After 12 years, we're moving on to new projects and fresh ways of highlighting cool sites across the Web. We'll still be here in different guises, like on Yahoo! Green writing about eco-friendly sites, or Yahoo! Answers calling out cool questions, or on the Yahoo! Buzz Log, sifting through what people are searching for online. And the Yahoo! Picks archive will remain available to anyone who wants to wander in. Thanks for your support and attention all these years.

2008 Predictions from John Battelle

John Battelle, author of "The Search" and Searchblog, has been listing his internet predictions for a few years, and he's got some interesting ones for 2008 over at Searchblog.

Among John's predictions are these:

Wall Street will start to challenge Google's potential to keep growing earnings so dramatically .

Yahoo will partner in a large way with another online player and may start to flex it's online traffic muscle more effectively.

Online advertising will continue to grow even if we see a recession.

Many venture funded companies will die.

John has a good record of predicting things and these all sound very reasonable to me, so my money is on Battelle for 2008.

Yahoo's CPO Goes to Google And Speaking at Web 2.0 Conference

Yahoo's Chief Performance Officer (CPO), Steve Souders, is moving to Google starting next week and will be a speaker on "Creating High-Performance Websites" at our Web 2.0 Conference on Jan. 29. Sounders, who has been with Yahoo since 2000 was responsible for developing a set of best practices for making web sites faster. He worked on the YSlow Firefox (Firebug) extension, as well as the official Developer Network, and the User Interface blogs. He is also the author of a book titled - you guessed it - High Performance Web Sites.

Google Tops Search Market

Google Search dominated the online search market in November according to a report by Nielson Online. Google grew its share of the U.S. online search market to 57.7% with 4.25 billion searches in November from October's 55.5%.

Yahoo came in second with 1.32 billion searches and a decreased market share of 17.9% from 18.8% in the previous month.

Microsoft Live was third with about 880 million searches and a decreased market share of 12% from 13.8% in October.

AOL was number four with approximately 332 million searches accounting for a 4.5% share.

Simple Web 2.0 Guideline: Be Like Flickr

Flickr has been my favorite Web 2.0 application for some time, and I think it's for a very good reason: Flickr is a fundamentally enabling application. Initially, I just used the (superb) photo uploader to send all my vacation and family pix online for easy storage. That soon evolved into better labelling, categorizing, and searching for photos, as well as the ability to share them with friends and family, even restricting access as needed. Flickr makes all this fairly easy, and as such sets what I'd say is *the* critical Web 2.0 guideline - make it simple!

My favorite feature of Flickr has come about fairly recently. It is the ability to connect your blog to Flickr and then quickly post Flickr photos to your blog along with a blog post for the photo that you can write from within Flickr - i.e. you don't have to do a separate blog logon and blogging session to get the job done. This really rocks because, again, it is *simple*. Sure, it's not a big deal to copy images and upload them separately to blogs, but I think with each step comes a cost in terms of your time and more importantly your motivation to get the job done.

Flickr makes it almost seamless to upload, categorize, and blog an image in the matter of a few minutes. That's beautiful, and that is a Web 2.0 standard I'd love to see everywhere.

Holiday Logos As Seen Around The Web

Here are some holiday logos being featured on the sites of Google, Yahoo, and Ask.

Google Adding Blogs to Universal Search

Google is expected to start adding blogs in the next week or so to its universal search results, an initiative which was launched back in May. According to Marissa Mayer, VP of Search Products & User Experience, queries will return links to blogs alongside the images, news, books, local maps and video. This is indicative of the growing popularity and effectiveness of blogs which at last count were being created at 100,00 per day. The other big three search engines - Yahoo, Live Search, and Ask - currently include blogs as part of their search results in some form or the other.

Yahoo! News Political Dashboard

Yahoo's political dashboard is an interesting new initiative from Yahoo which shows who's winning and losing in the '08 presidential race and related trends and analyses. The Yahoo! News Political Dashboard also provides polling data and tracks campaign fundraising dollars and "buzz" which shows how much candidates are being searched for on Yahoo and political prediction Market values. Although, I wouldn't use the buzz metric to determine a candidate's overall popularity given that it is based solely on searches on Yahoo versus incorporating searches on other popular search engines. You can also get a state view of candidates impact in addition to the national view.

It's a flash interface with mostly tabbed and pane views and popups. It has some nice mouseover effects; didn't care much for the blinding flashbulb-type effect though that appears onmouseover of a candidate's photo. It's very blue...hmmm dunno if that's a coincidence or not :). The Yahoo logo is red! Some users might want to customize their page color by selecting between red or blue depending on their political persuasion like on the Yahoo.com homepage. I do think this site has some potential stickiness to it providing it catches on.

Yahoo to Launch Online Program for Technology Investors

Yahoo's "TechTicker", an online financial news program for reporting on tech stocks is scheduled to launch next month. The web-based program is targeted at investors in tech stocks and will feature blogs and streaming video. This seems to be the next step up from Yahoo's Finance site but not everyone seems to think it is a good investment.

Mike McGuire, a media analyst with Gartner Inc., said he thought it would be difficult for TechTicker to distinguish itself. "If they can get an audience aggregated around the site, it can provide an off-ramp to other Yahoo properties," Mr. McGuire said. "But we have a ton of stuff that’s available on TV and any number of blogs and Web sites that provide close to real-time accounts, so this will be a real challenge for Yahoo."

Read more >>

Microsoft to Offer Mobile Ads

In a bid to claim more of the mobile market and to catch up to competitors, Microsoft is reportedly set to launch mobile advertising on Monday on the U.S. version of MSN Mobile. Mini banners and text ads will be displayed on the MSN Mobile portal along with news, weather, stock, and movie info, search, email (Hotmail), IM (Messenger), and Microsoft's blogging and social networking platform (Live Spaces). They apprently already run ads in other global markets. As you may recall Microsoft bought online advertising company aQuantive in May for $6 billion in response to Google's Doubleclick purchase for $3 billion.

Google's Mobile Ads are text-based and allows users to navigate to the advertiser's mobile site or call the business directly. With Yahoo Mobile Ad Network, it appears that advertisers can choose from display banner ads, sponsored search links, video spots, in–game or in–application placements, call, SMS, or if you don't have a mobile site, they will even build one for you.

Flickr Upgrades Feature Set

Yahoo has just launched a new feature on Flickr, its highly popular online photo management and sharing site. Flickr users can now edit photos online in their digital photo albums using photo editing tools. This capability comes compliments of a partnership with Picnik.

In Flickr, when you click on a photo to view it, an "Edit Photo" option appears above the photo. When you click that, a window appears on top of the Flickr interface prompting first-time users to "enable Picnik to open inside your Flickr account". Once you click "Ok", you can then proceed to do any of the following: auto-fix, rotate, crop, resize, exposure, colors, sharpen, red-eye, and best of all, it allows you to undo and redo. Once you've edited and saved a photo, the new photo is uploaded to your account. According to the Picnik site, the app works on the PC, Mac, and Linux platforms; and, Internet Explorer for Windows, Firefox for Windows, Firefox for Mac OS X, Safari for Mac OS X or Firefox for Linux are the only browsers supported.

Flickr boasts 20 million users and according to comScore is the "most-trafficked U.S. photo-sharing site that doesn't revolve around a social network". Flickr's rivals including Shutterfly, Snapfish, Kodak Gallery, and Google's Picasa, already offer free photo-editing tools.

A Comparison of Google, Yahoo, and Microsoft's Indexes

[Update – October 5, 2007] Five days after posting this article (in French), 118 pages of the site are indexed on Google, which wins across the board for exhaustiveness, relevance and speed. Without contest!

Yahoo! and Microsoft are still at the same point…and the others are worse: it’s unknown on Ask, and Exalead shows a thumbnail of a parking service for my site, which was parked over a year ago. Hello, relevance (it’s l'exception française)!

INTRODUCTION
A few days ago I uploaded XBRL.name, a glossary in 7 languages on IFRS terminology.

For one, I was surprised to see that the domain name, which has existed on the site Studio92.net for over two years, had retained the PR4 of the page it was on, but that wouldn’t last!
At the same time, you can imagine how avidly I’m on the lookout to see when my site will be indexed in the search engines. I check every day on GYM. The results are edifying! Here is the status as of October 1, after the site was uploaded on September 23, in other words in eight days.

I should specify that it’s not completed; only 1/7 of the site is finished, a little less than 200 pages out of approximately 1400 expected when the site is complete.

Finally, this post has no pretension to being more than it is: the simple tracking of a week of the indexing of a new site. Nothing scientific here, just a personal experience. [Top]

INDEX SIZE
It goes without saying that each of the three index generously exceeds 20 billion web pages!!! If you’re nostalgic, click here...

The engines don’t communicate much on the topic, except Microsoft, which makes a point to let you know it has caught up, quadrupling the size of its index from 5 billion to 20 billion pages. OK!

However, Yahoo! was already declaring more than 19 billion pages in… August 2005 (despite Jean Véronis’s questioning) and Google, 24 billion pages three months later (see here, end of page 5)!

So while I partially agree with Eric Enge when he states that At some level, the exact index size is not a big issue, unless, your index is simply too small, I agree less with his idea that increased index size is related to increased relevance (In short, Microsoft needed to make a move of this type to improve their relevance).

Relevance is not necessarily dependent on coverage (What's at issue is coverage... and if you don't have the related sites in the index, you can't return the right result), since the engine may very well have the relevant site in its index and still keep quiet (not list a result).

And of course, Microsoft presented a demo to illustrate its point of view, specifically on "shelli segal" and the site of a corresponding designer, which appears first on Live Search but makes the grave error of being absent in Google’s index!

Might one suspect Microsoft of cooking up an ad hoc search just to justify its relevance, relevance, relevance?

A good way to find out is to test it with xbrl.name, where the three search engines are on equal footing against it, since it was uploaded eight days ago without being intentionally presented for indexing; I just put the link on my blog and on several other sites. [Top]

GOOGLE INDEX
Until yesterday, Google returned 190 results total and gave the following excerpt for the site:

My SPIP site. Search. Home page. My SPIP site. Follow-up of the site's activity RSS 2.0 Site Map Private area SPIP template.

That is, it had saved the SPIP installation I tested, before opting for a site in HTML.

But today – sigh of relief – Google returns 300 results and finally sees the new version of the site: Conclusion: Google took note of the site in 8 days, although the content of the glossary does not yet seem to be indexed. [Top]

YAHOO!'S INDEX
Yahoo! returns 30 results and the following excerpt:

This is the placeholder for domain xbrl.name. If you see this page after uploading site content ... This page has been automatically generated by Plesk.

Plus one page correctly indexed. What about the 200-some others?

So Yahoo! presents a tenth as many results as Google and just one page indexed. [Top]

MICROSOFT'S INDEX
Just one result! Period. Same excerpt as Yahoo.

Then that last line that kills me: “Are you satisfied with Live Search? Tell us."

What to say? That in light of what preceded it, Microsoft definitely deserves its third place. Dead last!

The ranking is confirmed by my blog’s visit stats, as you can see in the table below:

Search engines were the source of 2,826 visits on Adscriptor during September and represented 41.21% of total visits (188 visitors and 242 pages viewed per day, with an average time on site of 1'35'' per visit) (not everyone’s named Otto, fortunately for him ;-).

With 2,575 referring links, Google alone represents >91% of these visits, versus 5.4% from Yahoo! and three times less than Yahoo! for Microsoft. Google is overwhelming superior. Why?

Clearly, if Google weren’t there, I would have a presence on the Internet…with zero visibility on search engines! [Top]

INDEX CACHING AND REFRESHING
In addition to size and relevance, one last aspect related to engine indices concerns their refreshing frequency, with a cache cycle that has shortened considerably recently for Google (I don’t use Yahoo! or Microsoft enough to say about them). Before, it seemed like the cache stayed around for a while and you could retrieve information several weeks later; now, it’s only a matter of days. For example, I was previously able to retrieve practically all of Alexis Debat’s fake interviews, but as the days go on, fewer and fewer can be found. [Top]

CONCLUSION
Concerning the performance Microsoft claims, Eric Enge is right when he says:

Ultimately, the point is, you can't return the right result if the site you should be returning for a given search is not in your index.

That’s clear. But it’s even worse to have the site in your index and not understand that the “right” site is precisely that one! [Top]

P.S. Well, it seems that Yahoo! and Microsoft are not giving up. They must have read my post overnight!

I tried Yahoo! Search again (it was recently improved, other details here); the tool still offers no suggestions:

but it has finally correctly indexed the home page. Everything else was the same: 31 results total and only 2 of the site’s pages.

On Live Search, too, the indexing is now correct for 2 of the site’s pages, which are the only results offered.

Meanwhile, Google has gone from 17 to 47 pages indexed: now several lengths ahead of the competition.

That said, given the number of web pages on the Internet (???), it’s pretty remarkable to see a new site indexed in eight days on GYM. And it makes sense why the next steps in searching in 2010 will be:

1. search engine verticalization
2. personalization of results
3. universal search

Not to mention local search... [Top]

Google Announces Fastest Growing Search Terms

Marissa Mayer, VP of Search Products & User Experience at Google announced yesterday on the Today Show, the fastest rising search terms on Google in 2007.

Here they are:
1. iphone
2. webkinz
3. tmz
4. transformers
5. youtube
6. club penguin
7. myspace
8. heroes
9. facebook
10. anna nicole smith

Yahoo also released their "Top Trends in Search" list yesterday for 2007.

News Stories - top 10 news stories:
1. Saddam Hussein
2. Iran
3. Iraq
4. President George W. Bush
5. Oil and Gas prices
6. Barack Obama
7. Hillary Rodham Clinton
8. San Diego Fires
9. Afghanistan
10. Virginia Tech

Complete Yahoo list.

Portability of Applications and Widgets

Talk about portable widgets is not new. After all, 2007 has been proclaimed "Year of the Widget" by Newsweek. Though what I intend to discuss here is more about portability aspects and efforts in this direction rather than about widgets themselves. One of the early entrants in the market was Knofabulator (remember anyone?) which was bought by Yahoo. Then it seemed that they didn't know what to do with it and rebranded it but added no extra functionalities. A few days back it was in the news that Yahoo was releasing version 4.5 of its Konfabulator widget. The new version includes things like HTML and Flash support as well as a better user interface. However, Yahoo widgets are still only for desktops like Vista or XP. However, with Google releasing widgets for Mac a few days back, as well as Mac having widget support and Microsoft supporting widgets in Vista, Yahoo may find itself facing tough competition in a comparatively small market. Such widgets are important if we see them in the light of what is expected of applications in future. Application virtualization is gaining ground and also to be noted is the following vision of Google's CEO, Eric Schmidt.

Netvibes is a company which had initially announced a widget platform to make widgets that can work on Vista, Google, Mac, and even Yahoo widgets. It is called Universal Widget API and has the aim of "build your module once, deploy everywhere". Other companies in this space are Musestorm and Clearspring. Musestorm enables non-programmers to develop rich media widgets and Clearspring specializes in distributing widgets as well as analytics and API. The next step, of course, would be for these applications or widgets to run on mobile as well. For instance, I am sure Google's Android which is to be released next year with Open Handset Alliance will soon be integrated with their Web ToolKit so that applications can run over mobile, computer, and web. And won't that be cool?

Cyber Monday Shuts Down Yahoo

Yahoo! Small Business the service for powering shopping carts for small businesses is down and closed for business. The services is suffering from intermittent outages today as shoppers flock to e-commerce sites on company time. “Cyber Monday” is an important day for e-tailers, and such an outage is quite embarrassing for Yahoo.

Yahoo & Newpapers To Counter Craigslist

Yahoo Inc. has added 17 more newspapers to its group of online publishing partners, bringing its total number to about 415 dailies and another 140 weeklies.

The program integrates the online help-wanted classified advertising listing of newspapers with Yahoo's online job search database HotJobs with spproximately 377 papers already using the service. Yahoo lets newspapers add job listings to its HotJobs database at a wholesale rate, while newspapers can charge higher prices to advertisers for help-wanted ads that they also upload to HotJobs.

For newspapers, linking their online recruitment ads with HotJobs is seen as a way to hold on to more advertising dollars amid competition from Internet rivals like Craigslist. Other newspapers have linked up with Monster Worldwide Inc. in online classified ads or are part of CareerBuilder, a joint venture owned by the three largest newspaper publishers, Gannett Co., Tribune Co. and McClatchy Co.

Newspapers in the Yahoo consortium will also have the option of signing up for a system run by Yahoo that will serve advertising to Web viewers, but that won't be operational until 2008, Lloyd said. Members of the newspaper group can also share news headlines with Yahoo and have Yahoo become the search provider for their Web sites.

Inbox 2.0: Yahoo and Google to Turn E-Mail Into a Social Network

There are reportedly plans underway to transform your email into a social network. Yahoo and Google are looking at turning their e-mail systems and personalized home page services (iGoogle and MyYahoo) into social networks.

"Web-based e-mail systems already contain much of what Facebook calls the social graph — the connections between people. That’s why the social networks offer to import the e-mail address books of new users to jump-start their list of friends. Yahoo and Google realize that they have this information and can use it to build their own services that connect people to their contacts."

This is a creative extension of traditional Gmail and Yahoo email that so many people use and whose success is dependent on a number of factors. Gmail already has chat integrated and both My Yahoo and iGoogle have widgets or gadgets available. Google also recently made an upgrade to the Gmail Contacts Manager which is more usable and profile oriented.

Web Sites To Offer Real Time Quotes

Internet finance sites such as Google and Yahoo Finance have been waiting months for regulatory permission to start offering free, real-time U.S. stock quotes. Presently, most web sites not associated with a broker show U.S. stock quotes with a 15- or 20-minute delay.

The hold up is over the price the stock exchanges can charge web sites for trading data. Katie Stanton, of Google Finance said they have already got approval from two Chinese exchanges in Shanghai and Shenzhen to carry real-time quotes and immediately saw a leap in demand for that service.

"You can get real-time sports scores, weather, news, but you still can't easily get real-time stock market data," she said. "We should have had this ages ago."

"We're falling behind the rest of the world here," said Ron Jordan, senior vice president of NYSE Euronext's U.S. market data. "The fact that China can introduce real-time prices into the United States before the NYSE can is ridiculous."

Stock exchanges want to charge web sites a per user fee by tracking each user. Web sites such as Google, Yahoo, MSN and others offer wider distribution of market information to consumers than NYSE or NASDAQ on a daily basis.

Yahoo Focused On Mobile Ads & May Follow Google

Yahoo! will not be focusing on mobile as Google is doing. Instead Yahoo will be focusing on selling ads for the mobile platform, reports the Globe and Mail.

"Yahoo is working on a number of deals that enable it to sell ads across carriers", said Marco Boerries, GM Yahoo Mobile.

Yahoo has been inking deals with network carriers to bring mapping, email and other features to mobile internet users. These services will be accompanied by Yahoo ads.

Boerries doubts Google will be able to sell enough advertising to cover the costs it will incur from its mobile business model. However, if Google succeeds in doing so, Yahoo is open to adopting a similar software-based model.

Yahoo Launching Social Networking Site

Yahoo is said to be working on a social networking community site called Kickstart which is a professional network to connect college students, recent grads, professionals and alumni to discover internships and jobs, or get career advice and mentorship. The site states that KickStart is in its preview release with no mention of a general availability date. The service allows you to create a profile, browse company profiles, network with your peers, professors, alumni and potential employers, source new hires, give back to your college, and re-connect with fellow alumni and past colleagues. And the kicker is "Yahoo! will donate $25,000 to the alumni association of the college with the most profiles".

Yahoo has previously made unsuccessful attempts to gain a foothold in the lucrative social networking space with services such as Yahoo 360 blog turned social network, Y! Pipes, its rumored social networking site called Yahoo Mosh, and most recently its failed bid for Facebook.

Yahoo is also planning to release another new service this month, code-named FireEagle, a geo-location service which will let users tell their friends or other websites and services their location and which can me mashed up with other web services.

The Best Search Engines

According to a recent article in Newsweek, many start-ups and up-and-coming players are in the pipeline chipping away at Google's search dominance. In some countries Google apparently barely registers on the search engine radar. Google has less than 2 percent of the search engine market in South Korea. Naver, the country’s most popular search engine, receives 100 million queries each day and over half of the population of 48 million has used it at some point. The site has been around for 5 years and has amassed a huge database of questions and answers to draw upon, 70 million at the last count. More>>

Google's New Translator Service

Google is reportedly now using their own machine translator technology on Google Translate which was previously provided by Systran, a provider of online translation, translation software, and tools. There are apparently still issues with both technologies - Systran translation used by Altavista and Yahoo, and Google translation.

I like that Google allows you to translate a word or a block of text, entire web pages, and search in other languages. What is also cool is when you translate text, it will give you the option to "Suggest a better translation" so it's almost self-learning or self-correcting. But the option to "Get Translation Browser Buttons" is just an option to add to favorites; I expected a Google Toolbar button add-on. The Yahoo translation tool limits you to 150 words for their text translation, you can search the web for translated text but you can't specify what language you want to search in; I guess by default it assumes you want to search in the language of the translated text. They do have the option to "Add Babel Fish to your Yahoo! Toolbar" and I like the "Add Babel Fish Translation to your site" widget where depending on which one you choose, you can have people localize your site on the fly.

The problem with all this is that these tools are machine translations without any human intervention and while neither methodology is error free, computer assisted translation is more exacting. However, translations are of natural-language and dependent on context and conventions and is not always as literal or word-for-word. Most larger companies with geo-specific sites are engaged in multi-lingual computing at some capacity. And as a result, most pay a pirate's booty for human translation services which is billed by the word. It would be great if these online translation technologies could be used initially followed by human intervention.

Yahoo's Ex-CEO Terri Semel Sells 750,000 Shares

CNNMoney is reporting that Terri Semel, Yahoo's Chairmen and Ex-CEO has exercised 750,000 options and disposed of them in the open market. He exercised options for $15 each and then sold those options for $29 to $29.90 each between 10/19/2007 and 10/22/2007. Some of the sales were same day transaction.

Terri has been rewarded handsomely for his mismanagement of Yahoo. The $15 strike price for the options was considered lofty when it was awarded to him. Yahoo's prospects seemed pretty bleak at the time of the option grants. But today he is benefiting nicely from the bounce in the stock price which materialized as a result of this departure.

Terri was well known for not knowing what email was prior to joining Yahoo. He was baffled when people would send eachother email when they could simply make a phone call or walk over to their desks. Terri also hired many old world cronies who were clueless about the internet business, gave them executive positions and loaded them up with stock options. "He surrounded himself with people who knew absolutely nothing about the internet business", said a source.

Date       Insider Shares   Transaction Type                      Value*
24-Oct-07  SEMEL TERRY
           350,000 Director Option Exercise at $15 per share.    $5,250,000
24-Oct-07  SEMEL TERRY
           350,000 Director Sale at $30.52 - $30.63 per share.  $10,701,000
23-Oct-07  SEMEL TERRY
           500,000 Director Option Exercise at $15 per share.    $7,500,000
23-Oct-07  SEMEL TERRY
           500,000 Director Sale at $30.19 - $30.69 per share.  $15,220,000
22-Oct-07  SEMEL TERRY
           250,000 Director Option Exercise at $15 per share.    $3,750,000
22-Oct-07  SEMEL TERRY
           250,000 Director Sale at $29.71 - $29.9 per share.    $7,451,000
19-Oct-07  SEMEL TERRY
           500,000 Director Option Exercise at $15 per share.    $7,500,000
19-Oct-07  SEMEL TERRY
           500,000 Director Sale at $29 - $29.27 per share.     $14,567,000

2nd Yahoo VP Out This Week; 14 Out So Far

The Wall Street Journal is reporting that another Yahoo executive Jacki Kelley VP Sales Strategy is jumping ship. She joined the company about a year ago. Jacki is being poached by Wenda Harris Millard, who left Yahoo earlier this year for Martha Stewart Living Omnimedia (MSLO) after a rocky goodbye. To view other Yahoo departures click here.

At MSLO, Kelley will be the Executive Vice President of media sales, overseeing all digital, magazine and broadcasting sales. A noted perk with her new position is that Kelley will be in New York on a full-time basis. As it’s been reported that Kelley was beginning to tire of travel between NYC and Sunnyvale, CA, it would be a luring factor for Kelley’s ultimate decision to leave Yahoo.

Kelly was recruited as VP despite the fact she knew nothing about the internet business. This was classic Terri Semel. He clogged the internet power house with old world cronies who knew nothing about the internet business as it is widely known today. Terri himself did not know what email was when he joined Yahoo! and he was baffled why people would send eachother email when they could simply make a phone call or walk over to their desks. Click here to see all executive departed to date.

San Jose Mercury News: Too Old?

There is a great summary at Business Week of the remarkable rise and pending potential fall of Silicon Valley’s newspaper - the San Jose Mercury News. BW notes that in many ways the Mercury News saw it all coming, but still failed to position itself to profit from the migration of offline info to online info.

Although the article does not make this point, I'd suggest that the failure supports the idea that paradigm shifts do not come from old systems evolving into new ones even when the old systems “get it”, rather they come from new folks thinking out of the old boxes and building the next generation of innovative solutions basically from scratch.

Obviously new technology almost always rests on the shoulders of old technology, but it seems reasonable to assume that the next big things are not going to come from the previous big things, they are going to spring up from the harsh, quirky, and shifting sands of technology, inspiration, and innovation.

I would suggest that IBM might be an exception to this notion but clearly Microsoft, then Yahoo and Google, now YouTube, Myspace and Facebook all fit this model of major online changes coming more from scratch than from a slow simmering of existing ideas. This also helps explain the challenges of venture capitalists as they try to find “the next big thing”, a company that may only be known by the glimmer in a college kid’s eye.

If so, who is next?

Local Search, Review & Listing Vertical Challenging

TechCrunch is reporting that Judy’s Book a Craigslist alternative for local deals will be shutting down. The company raised $10M in venture money and most of the staff has been let go.

Judy’s Book started off as a community driven review site for local businesses, but changed it’s focus in 2006 when the original model looked to be failing. The company de-focused on local reviews, and went more towards the shopping angle and local deals.

Despite the fact that Craigslist is thriving well, the local review and search vertical has been a tough one. Intuit shut down Zipingo last year and InsiderPages was purchased at cost by IAC's CitySearch.

Other companies in the local search, review, listing and shopping vertical that are still standing are Yelp, Zvents, Krillion, Local.com to name a few. However, expect there to be competition from Google, Yahoo, Microsoft, Ask.com and AOL. Due to the sheer mass and specificity of the data Google, Yahoo and Microsoft are better able to leverage their existing search platforms to present local information. Google has rolled out a special program to maps streets in India. Also, the economics of integrating mapping and other technologies favor Google, Yahoo and the other majors.

Search Rankings For September 2007

comScore, Inc. (Nasdaq: SCOR), released its monthly comScore qSearch analysis of the U.S. search marketplace for September 2007. Google remained the top search property with more than 5.3 billion core searches conducted, representing a 57% share of the search market, followed by Yahoo! 23.7%, Microsoft 10.3%, Ask.com 4.7% and Time Warner Network 4.3 %.

comScore qSearch 2.0 Report - Total U.S. Home/Work/University Location

Share of Searches (%)

Search Entity                       Aug-07          Sep-07     Sep vs. Aug
Total Core Search                   100.0%          100.0%        0.0
Google Sites                         56.5%           57.0%        0.5
Yahoo! Sites                         23.3%           23.7%        0.4
Microsoft Sites                      11.3%           10.3%       -1.0
Ask Network                           4.5%            4.7%        0.2
Time Warner  Network                  4.5%            4.3%       -0.2

* Based on the five major search engines including partner searches and cross-channel searches. Searches for mapping, local directory, and user-generated video sites that are not on the core domain of the five search engines are not included in the core search numbers.

September U.S. Expanded Search Rankings

In the September 2007 analysis of the Top 50 properties worldwide where search activity is observed, Google Sites led the pack with 6.6 billion searches. Yahoo! Sites ranked second with nearly 2.4 billion searches, followed by Microsoft Sites (999 million), Time Warner Network (843 million) and Fox Interactive Media (492 million). Despite the decline in overall search activity in September, Ask.com saw a 10-percent gain versus August.

Expanded Search Query Report - Total U.S. Home/Work/University Locations

Search Queries (MM)

Expanded Search Entity             Aug-07          Sep-07      Sep vs. Aug
Total Expanded Search              13,703          13,018        -5.0%
Google Sites                        6,809           6,593        -3.2%
Google                              5,602           5,388        -3.8%
YouTube/All Other                   1,207           1,205        -0.2%
Yahoo! Sites                        2,473           2,381        -3.7%
Yahoo!                              2,438           2,346        -3.8%
All Other                              35              35         0.0%
Microsoft Sites                     1,144             999       -12.7%
MSN-Windows Live                    1,111             966       -13.1%
Microsoft/All Other                    33              33         0.0%
Time Warner Network                   937             843       -10.0%
AOL                                   438             397        -9.4%
Mapquest/All Other                    499             446       -10.6%
Fox Interactive Media                 571             492       -13.8%
MySpace                               560             483       -13.8%
All Other                              11               9       -18.2%
eBay                                  457             445        -2.6%
Ask Network                           439             445         1.4%
Ask.com                               205             226        10.2%
MyWebSearch.com/ All Other            234             219        -6.4%
CRAIGSLIST.ORG                        199             197        -1.0%
Amazon Sites                          154             138       -10.4%
Comcast Corporation                    73              65       -11.0%

Yahoo CMO Cammie Dunaway Latest Departure from Yahoo

Yahoo CMO, Cammie Dunaway, is the latest in the exodus from Yahoo. Cammie joined Yahoo in June 2003 as chief marketing officer and was responsible for leading Yahoo!’s worldwide branding efforts and driving the company’s product marketing initiatives. This, on the heels, of other famous exits such as Terry Semel, Yahoo CEO, until his departure in June this year and Yahoo's CTO, Farzad Nazem.

Yahoo's earnings which came out last week reported stronger revenues of $1.77 billion, a 12 percent improvement from last year but profits down 5% compared to same period last year.

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