Posted on October 20th, 2011 at 23:02 No comments
A Microsoft-Yahoo-Alibaba hookup just makes sense.
When you hear the news in coming weeks, remember: it’s Alibaba first and last.
InfoWorld Tech Watch.
Posted on April 23rd, 2011 at 18:13 4 comments
Microsoft, working in its well-honed Black Widow Spider mode, has sucked the soft part out of Yahoo. At least publicly, the Yahoolies don’t seem to have noticed that they’ve been out-manuevered by the Redmond Horde. But they have. Rumors are flying that Microsoft may make yet another bid for Yahoo. I don’t believe it. Microsoft already has everything it wants out of Yahoo, with one exception. I figure MS will join with several other companies and make a bid for Yahoo, soon. I also suspect MS won’t pay much, and won’t want much out of the transaction. Here’s why.
Last Tuesday night, Yahoo announced truly abysmal financial results. Yes, Yahoo’s stock shot up on Wednesday, and it’s been holding strong. The MarketBeat blog at Wall Street Journal says that analysts reacted positively to the Yahoo Earnings announcement, even though earnings fell somewhere between 6 and 8% from 1Q 2010 to 1Q 2011, depending on how you count. Revenue was down a whopping 24%.
The universally-acknowledged bugaboo, per Yahoo’s press release: “the required change in revenue presentation related to the Search Agreement and the associated revenue share with Microsoft. For transitioned markets (U.S. and Canada), Yahoo! now reports revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis.” TAC is the Traffic Acquisition Cost, or the amount that Yahoo pays other parties to generate search revenue.
But the numbers speak for themselves, and the numbers don’t do Yahoo any favors. Display revenue is up, but search revenue – the part that got Binged – is down 19%, between 1Q 2010 and 1Q 2011. More than that, Yahoo may blame revenue sharing with Microsoft for its losses, but that 19% drop is simply money – it has nothing to do with TAC. Microsoft gets 12% of Yahoo’s search revenue, and the MS cut doesn’t have anything to do with TAC. For the details, see Greg Sterling’s analysis in his SearchEngineLand blog.
Taking the analysis one step further, Sterling shows that Yahoo’s search revenue has taken a long, sustained, steep drop since mid-2008. The Microsoft search deal only exacerbated an already-bad problem. As Sterling puts it, “In the end, I come away with — and sorry to say it — not a whole lot of faith in what Yahoo’s been saying, much less the grand master plan that outsourcing to Microsoft was going to save its search business. Yahoo still has substantial search traffic, but it remains dwarfed by Google while Bing has been closing the gap… there’s no doubt that Yahoo’s not in the driver’s seat on search.” This, in spite of the fact that Yahoo has a considerably larger share of the US search market than Bing. “[Yahoo]‘s having to pray that its partner (which is also a chief competitor) will fix things to boost its revenue. If that doesn’t happen, what Microsoft has to pay out seems like pocket change.”
Look at it from the Microsoft side. Ballmer tried to buy Yahoo for $44.6 billion in February 2008, met fierce resistance – including a threat to sell Yahoo to News Corp and mingle with MySpace – then Microsoft gave up in May. In November 2008 the shotgun came out again, and it looked like MS and Yahoo were headed to the alter. Ballmer reportedly offered $20 billion for Yahoo’s search business – at the time Yahoo’s total market value was about $16 billion – but Yahoo, it’s said, wanted more. Yahoo co-founder and CEO Jerry Yang stepped down, replaced by Carol Bartz, and the deal fell through.
In July 2009, Microsoft and Yahoo reached a 10-year deal that moved Yahoo search to the Bing engine, in the US and Canada. Yahoo would pay Microsoft 12% of the gross revenue from all of the ads that run next to search results. Based on Yahoo’s results just announced, Microsoft got the better end of the deal: Bing more than doubled its market share, overnight – and Yahoo pays Microsoft for the privelege.
Yahoo still has the most-visited site on the Internet; according to Comscore, Yahoo just edged out Google and Microsoft as the most-visited site, from the US, in March 2011. Yahoo’s advertising revenue is doing well. Yahoo has $3.5 billion in cash, and owns big parts of Yahoo Japan and Alibaba.com. But the value of its search capability is seen almost universally as turning an enormous belly flop.
All of this has led to speculation that the sharks are circling, and Yahoo’s days as an independent company are numbered. Kara Swisher at All Things Digital has developed several possible scenarios.
Microsoft already has the most important piece of Yahoo, from their perspective – search market share. The other pieces of Yahoo aren’t nearly as compelling. But there are two missing parts, which lead me to believe that MS will be interested in participating in the dismembering of Yahoo.
First, MS hasn’t nailed down international search rights. The current search agreement only includes the US and Canada. International search is a key future sticking point for Bing, and owning part of Yahoo will help put yet another foot in the door.
Second, Microsoft doesn’t want to give Google even a tiny slice of the pie. Any pie. The best way to ensure that – to make sure that a Google-leaning exec doesn’t head up the reconstituted Yahoo, for example – is to have a stake in the company.
Softbank is chomping at the bit to consolidate its part of Yahoo Japan. Alibaba wants its shares back. No matter how you look at it, Yahoo is worth more in well-defined pieces than a jumbled hole. Microsoft didn’t start Yahoo’s downward spiral – I would argue that was inevitable, given Yahoo’s traditional businesses and the march of technology. But the Softies certainly sent a big piece of Yahoo into the trash bin. And the remainder is ripe for picking.
Posted on October 15th, 2010 at 08:47 No comments
Last month I wrote about Bing stealing Yahoo search market share, and explained why that didn’t mean much: as of August 24, the Bing engine effectively replaced the Yahoo search engine, so even if you see Yahoo on the screen, the results and the marketing oomph go to Microsoft.
This month, comScore reports an important change. According to their just-released report, Google’s U.S. market share went up from 65.4% in August to 66.1% in September. At the same time, Bing/Yahoo declined from 28.5 to 27.9%.
While the numbers seem impressive, you have to take them with more than a dash of salt. comScore changed the way it counts searches, in response to Google’s new Instant Search technology (which some wags note isn’t all that new, but I digress).
As Cameron Meierhofer on the comScore blog explains,
[T]he comScore panel provides visibility into all events that a user is conducting and all the HTTP calls associated with the user’s actions. Based on this insight, we have developed a priority scoring system that allows us to identify search results with explicit user action and interstitial results with a sufficiently long pause to suggest some level of implicit engagement.
If that sounds like a situation just begging to mess up search site usage scores, you’re right. In the end, comScore punted, assigning an arbitrary time-out period of three seconds, “Query result pages without explicit user action, but with a pause of at least 3 seconds, are considered as indicating â€˜implicit’ engagement and will count towards Total Core Search.”
As a dyed-in-the-wool curmudgeon, I have to wonder out loud if comScore chose that three second threshhold before or after they saw the statistics for September.
Any way, it’s a new race from this point on, and it’ll be interesting to see how Google and Microsoft fare. We won’t really be able to compare apples to apples until the October results are out.
And, of course, the really important numbers in the long run are for mobile search. But that’s another story.
Posted on October 14th, 2010 at 22:11 No comments
As you read this, Yahoo’s stock may be soaring. Or maybe not. Wait ten minutes and check again.
Recent activity seems to reflect a Wall Street Journal report that AOL (remember the company that makes almost half of its US revenue by selling dial-up internet access?) and a bunch of high power venture vult… er, private equity firms “are exploring making an offer to buy Yahoo.”
Yahoo stock’s meteoric rise appears to have started before that report hit the stands, fueled no doubt by insider tea leaf reading and ESP. Or something else.
When I saw the headlines, I first remembered Microsoft’s failed attempt to take over Yahoo, back in December 2008. Microsoft offered more than $45 billion. Yahoo fought back, successfully shunned Microsoft’s advances and, under a new CEO, ultimately saw its market capitalization fall to less than $20 billion. As Kara Swisher reports in her BoomTown blog, three top Yahoo execs recently left for greener pastures, and CEO Carol Bartz is feeling the pressure.
To make things more interesting, AOL – remember, they’re the big fish swallowing $20 billion Yahoo – has a market cap of less than $3 billion.
Yahoo’s more than a dial-up internet portal, though, and its investments make a potential takeover a prickly proposition.
Start with business affiliations. The enemy-of-my-enemy-is-my-friend camp at Microsoft has forged an alliance with Yahoo in which Microsoft’s Bing drives Yahoo’s search. As a unified force, under a ten-year contract, Yahoo and Microsoft are taking on Google for search engine market share. (Details in my post earlier today.)
AOL’s search engine, though, is tied to Google, with a five year contract that started just last month.
Here’s where it gets complicated.
Yahoo owns 35% or so of Yahoo Japan. The majority shareholder of Yahoo Japan is SoftBank. (If you’ve been in the business for a while, you may recall that Masayoshi Son, the founder of SoftBank, once owned all of US magazine publisher Ziff-Davis.) That’s a bit, uh, touchy because Yahoo Japan recently joined with Google to corner Japan’s search advertising market place. Microsoft’s suing Yahoo Japan over the snub.
Contrariwise, Yahoo owns 40% of China’s Alibaba, the pre-eminent Asian online business-to-business site. Yesterday, Microsoft and Alibaba announced a grand plan to take over China’s number-one search engine Baidu, launching a new “shopping search engine” called Etao. You may recall that Google and the Chinese government had something of a, shall we say, falling out, which left Baidu with more than 70% of the search engine market in the Middle Kingdom.
Alibaba tried to buy back its 40% stake, but Yahoo wouldn’t sell, and relationships between the two are said to be sour. That’s the polite way to put it.
So Google-affiliated AOL’s rumored to be going after nine-times-larger Microsoft-affiliated Yahoo, which owns 35% of a Japanese company being sued by Microsoft and 40% of a possibly-alienated Chinese company that just started a new venture with Microsoft.
To make it more complicated, many people believe that Yahoo’s most significant assets (some would say “only” significant long-term assets) are its stakes in Yahoo Japan and Alibaba.
Keep that in mind as you follow the machinations of the stock market this week.
Posted on July 29th, 2009 at 21:00 No comments