Yahoo One-Ups Microsoft's Three-Week Threat
|
News Analysis. The Yahoo-Google ad deal is bringing out the pundits, calling it a Microsoft takeover poison pill. They're wrong. It's a negotiating tactic, simultaneously with Microsoft and shareholders. |
Sure, the two-week trialright in the middle of Microsoft's threatening three-week deadlineis suspicious. Yes, the Yahoo board is cool to Microsoft's offer. But a Google poison pill is too big for Yahoo to swallow. The pundits are missing the point. Microsoft CEO Steve Ballmer made his threat; now Yahoo has its own. If Microsoft doesn't back off or up the takeover offer, Yahoo will get in bed with Google.
It's more bluff, methinks, but still one helluva a comeback. Yahoo beats Microsoft in the art of one-upmanship. No doubt, Google delights in another opportunity to yank Microsoft's leash.
The test's limits reveal the extent of Yahoo's willingness to climb into bed and cozy up with its search competitor. The test, for Google AdSense, is limited to 3 percent of traffic from Yahoo.com in the United States. During the trial, Google and Yahoo will serve ads side by side.
Microsoft was quick to spread some FUD (fear, uncertainty and doubt) about the Google-Yahoo deal. "Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo," in a statement from Brad Smith, Microsoft's general counsel.
Yeah, right. Google isn't buying Yahoo, just entering into a search and advertising trial. Three percent of U.S. Yahoo.com traffic hardly constitutes, combined with Google, "90 percent of the search advertising market." Please, get a life.
Between Microsoft and the pundits, there is plenty of nonsense antitrust FUD spreading around. Did the trustbusters cry foul when Microsoft reached licensing agreements with all major OEMs for DOS and Windows in the 1980s and 1990s? Microsoft got in some trouble for exclusive agreements, but not for cutting deals that gave Windows enormous market share. Monopolies aren't illegal in the United States, just the abuse of monopoly power. Microsoft legally obtained a monopoly, and so can Google. But, again, a temporary ad agreement for a tiny portion of Yahoo.com traffic won't get Google anywhere near 90 percent search and ad share.
The second part of Smith's statement is another threat: "We will assess closely all of our options," which could be read to mean "Pull out of the deal" or even "Up the offer."
Smith then reiterates Microsoft's plea to Yahoo shareholders: "Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company and enhances choice for content creators, advertisers, and consumers."
What choice is there in consolidation from three to two major search and advertising providers?
Yahoo's Google ad trial is more than just a Microsoft negotiating tactic. Yahoo also is negotiating with shareholders, trying to show them that there are other optionsthat Microsoft's offer isn't the "only alternative."
Yahoo may yet acquiesce to Microsoft, with the Google ad trial being nothing more than calling on a potential suitorthat is. playing hard to get for a bigger dowry. Just because Google matters to Microsoft as a rival suitor doesn't mean Google is as important to Yahoo.
For Google, any ad deal with Yahoo would be welcome:
- Google would want to scuttle the merger. Microsoft and Yahoo overlap in too many ways. They are more natural competitors than are Google and Microsoft. Meanwhile, where Microsoft wants to compete with Google, in advertising and search, Yahoo would be in the way. Microsoft-Yahoo competition would make easier Google's push for ad and search dominance.
- A permanent and expanded Yahoo deal would allow Google to organically grow ad and search market share without ruffling legitimate antitrust problems. Google almost certainly would hit antitrust roadblocks for a Yahoo acquisition. Only collusion between the companies to control the search markets would warrant some antitrust investigation. There is nothing to suggest such a situation here.
But there is irony in the Yahoo-Google agreement. Overture developed the search business model that Google perfected. Yahoo bought Overture in 2003. Now Google will provide, even temporarily, search and ad services to Yahoo, whose services are based on Overture's.
Related Posts:
- Yahoo Boo-Hoos Microsoft, Microsoft Watch, April 7, 2008
- Ballmer's Yahoo FUD Letter, Microsoft Watch, April 6, 2008
- Ballmer Boo-Hoos Yahoo, Microsoft Watch, April 6, 2008
- What 2007 Ad Spending Means to Microhoo, Microsoft Watch, March 26, 2008
- Microsoft Search Retreat Continues, Microsoft Watch, March 19, 2008
- Microsoft's Faulty Math, Microsoft Watch, Feb. 25, 2008
- Microsoft's IBM Moment, Microsoft Watch, Feb. 20, 2008
- Microsoft's One Yahoo Mind Divided, Microsoft Watch, Feb. 12, 2008
- Yahoo Squeaks, Microsoft Squawks, Microsoft Watch, Feb. 11, 2008
- Yahoo's Way Out, Microsoft Watch, Feb. 11, 2008
- The Real Reasons Microsoft Wants to Buy Yahoo, Microsoft Watch, Feb. 6, 2008
- It's No Flickr of Hope, Microsoft Watch, Feb. 4, 2008
- Yahoo Music Is a Real Problem, Microsoft Watch, Feb. 4, 2008
- Yahoo Bid Reveals Microsoft's Fatal Flaw, Microsoft Watch, Feb. 4, 2008
- Is Yahoo Worth the Risk?, Microsoft Watch, Feb. 1, 2008
- How a Yahoo Merger Could Screw Up Microsoft, Microsoft Watch, Feb. 1, 2008
- There's No Must in Microsoft's Yahoo Bid, Microsoft Watch, Feb. 1, 2008
- Why Did Microsoft Yell Yahoo Today?, Microsoft Watch, Feb. 1, 2008
- Will Microsoft Yell Yahoo?, Microsoft Watch, May 4, 2007


Comments (5)
Joe Joe Joeeee.
I'm disappointed in you. You must either be really feeling this Microsoft mating with Yahoo thing, or you're posturing to lure some Microsoft mouth to tell you a little more than what can be seen.
We're living through the birth pangs of a new age. History books will be written about the maneuvers being made... and the average Joe (no, not you, Joe. And average Joe.) is completely ignorant and unclued.
Which is why the average Joe needs an above average Joe to explain the real scenario. I realise you have to cuddle your sources, but, one word of advice: they would like to be able to get their story out to at least somebody who can right the perception and make them look good for the coming day of reckoning... which, Mister Spitzer may have found, will always come... because you can't.
Posted by portuno | April 10, 2008 1:17 AM
Yahoo needs to lose this offer with all the crap they're pulling. I realize being owned by Microsoft would be a fate worse than death for Yahoo's founding members (They can longer scream, "Kill M$!") but they are dying regardless, whether they want to admit it or not.
In a couple years Google will dominate everything if left unchallenged on the web and the difference between Microsoft's survival vs. Yahoo is that M$ has revenue coming in from OUTSIDE of the internet.
If Yahoo passes on this, you'll see it doing so-so for the next couple years (externally), with whatever company they get in bed with (probably AOL). Then, the company will take a sharp nosedive (its innovation/product cycles are too long and usually underwhelming - their best stuff is bought outright) and will turn into an internet relic rather than leading service provider.
Yahoo and Microsoft's only chance of becoming a true competitor to Google is by merging. And like it or not, Microsoft is the one who has the money to buy Yahoo, NOT the other way around.
Posted by Scott C. | April 10, 2008 9:49 AM
@Scott C.:
I don't doubt that Yahoo's future isn't all that bright if it tries to go it alone. Perhaps the reason that they are getting with Google is that they realize this also.
But if they are bought by Microsoft, they will die. Perhaps they also feel that, in the worst case, it's still better to be free and die than to languish in prison or in slavery and die.
And Yahoo's officers have no legal or moral obligation to bend to the whims of Steve Ballmer.
And what's up with Ballmer's overbearing ego? It's OK with him if Microsoft owns a desktop monopoly and leverages that monopoly to dominate other markets? But it's not OK with him if Google happens to be the place that most people go to search the internet?
Of course, I really am not complaining. It's Ballmer's poisonous attitude and Vista's "WOW This is bad!" entry in the desktop PC market that is driving competition and gives the best hope of eventually releasing Microsoft's crushing stranglehold on the world.
Posted by Philosopher | April 10, 2008 12:59 PM
@Philosopher
It may sound weird, but I'm glad there's a monopoly in the OS world and most people use Windows. Heck, if the world was 90% Mac and 5% Windows I wouldn't care either. the point is, an OS is simply a TOOL that provides the groundwork for every app imaginable that can be done by anyone.
However, when it comes to the internet, you DON'T want a monopoly on Search. If ANY company controls the majority of the market, they will end up controlling it all eventually. And whereas Windows simply interprets information, Google determines what information you're allowed to see.
Now because Google is trying to be the anti-Microsoft by offering all of its services for "free", the masses support it without a second thought of WHY everything Google is "free". In truth truth, it's NOT free at all. Google charges users for its services in the form of personal information. You have to believe that somewhere Google has a record of everything it looks for and for who and at any time can access that info to deliver "customized" search results...and data for advertisers.
If anyone bothers to remember back to the early 00s, they'll remember a far different Google...and Yahoo...and even MSN. With the introduction of SEO and keywords getting relevant, unbiased data off the internet has become an absolute nightmare.
Google needs to be stopped and Microsoft knows it. It knows it will never displace Google as the no. 1 search provider - they just don't want it to get too big...because if they were in their shoes, they know exactly what they'd do.
Yahoo is just the idiot company between the two who happens to have a 15% market share in Search. It doesn't help that they are thinking with their wallets than their heads...but then again, aren't all internet companies simply about making the most money in the fast time possible?
With that said, I hope this deal goes through and every high-level Yahoo employee responsible for trying to squash it gets axed as punishment. If it doesn't, I hope Yahoo realizes its mistake 5 years from now when Microsoft won't even offer a third of what its offering now (if anything at all) for a near dead internet portal.
Posted by Scott C. | April 10, 2008 3:23 PM
Google has a monopoly on search? Just because everyone wants to go there doesn't constitute a monopoly. It's free, it's fast, and it's (mostly) accurate. It's like honey: just because most people like it doesn't make honey a monopoly.
On the other hand, Windows is much more than tool. It's a source of increasingly heavy taxes on computing. It's a source of threats of legal action if you attempt to use or develop alternatives. And with Vista, it's about giving up control over the PC you bought.
Yahoo may or may not be an idiot company, but they don't owe Microsoft the time of day. It's their company to do as they choose.
Google may not be free because it charges for its services in the form of collected information. Whether or not they tie that directly to you and I is open for debate. But Microsoft increasingly adds this cost to their software, and they charge you money in addition, and they threaten to sue you if you use an alternative.
Unbiased data from the internet has always been open to question. Long before Google, newsgroups offered 1000 different opinions for 1000 different people.
And the SEO problem you mention is just another way to say "Google owes me a living and they won't give it to me." Too bad. My favorite plumber doesn't even have a web site and he doesn't show up in a Google search. But he shows up on time to every job, does a superb job, backs up his work without question. And that's why he's in successful in business. Idiots who hope for Google to help them because their own brains fail them aren't worth anything either way and deserve to suffer. Ad clicks are of questionable value, and so is SEO. It's all a house of cards (but then, so is the stock market, but I digress).
Google is the #1 search destination because it works better than that Ask crap, crippled Yahoo, Ask Jeeves, and others.
You hope that Yahoo officers who resist your precioussssssss Microsoft are severely punished. I hope those Yahoo officers are rewarded for resisting the offers of an unwanted suitor.
Posted by Philosopher | April 10, 2008 5:50 PM