A VC - Latest Comments in How Yahoo! Can Get Out Of The Microsoft Bear Hug

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

morocco property — Tue, 04 Mar 2008 05:41:45 -0000

I agree with you. The big advantage of Google over Yahoo is specialized search.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

John — Thu, 07 Feb 2008 09:48:25 -0000

Jerry Yang should use the leverage afforded by their strategic alliance with AT&T to sell to AT&T (controlling interest or total acquisition). This should not be a broblem for the feds and would keep the services/market share balance intact. Microsoft has little regard for monopoly considerations, if they could they would buy cisco, Yahoo,Google AT&T,Oracle and anyone else they could get their teeth into.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

burpnrun — Wed, 06 Feb 2008 13:20:07 -0000

BTW, if the following link is true, MS could cause a world of hurt for Google. Anyone know if it's true?

http://valleywag.com/351780...

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

burpnrun — Wed, 06 Feb 2008 12:32:49 -0000

Good article and perspective, Fred. I'm not financially saavy, but it seems to me that if there's a $12 value in yahoo's Asian investments, then Microsoft is effectively getting Yahoo for $19. So as a backstop to future MS ineptitude if they do get Yahoo, Ballmer can always pull the plug by selling off in whole or pieces at a better (proxy) share price when markets improve downstream.

Also, let's not forget that MS can be very predatory on pricing so, where Google has continually raised prices (1000% over the past year or so, is what I've read), a Microhoo entity would have plenty of moxy and strength to push pricing down and disrupt Google that way, if it wanted, as part of a "competitive" strategy. Don't forget the infamous $13 (or is it $3) Windows/Office packages for third world counties in response to Linux and open source alternatives to Office, etc.

(I frankly think MS is pushing a piece of wet spaghetti uphill with this "response", as all it does is stave off the inevitable. Whatever.)

Do we see the impetus for the MS move coming from the legacy nature of their current products, the continuing onslaught of open source, and the need to add a new (growth) business division to help their morphing? A new division to leapfrog over their past failures in these new business markets, and to meet the new competition (Google)?

If so, Yahoo has to be the only route open to MS to take this great leap forward, other than trying for Google ... which would only result in other smart folks "doing a Google" shortly afterwards). IOW, MS believes it's critical to acquire Yahoo.

I'm still trying to figure out *what* MS is trying to accomplish (I think I understand *why*), to get a better read on the *hows*.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Wed, 06 Feb 2008 12:15:02 -0000

Thanks david

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

josh guttman — Wed, 06 Feb 2008 09:36:49 -0000

I agree with this assessment. Though from MSFT's perspective, they could just as easily acquire the company, and then execute such a plan or another, unlocking more value from the entity. Word from my sources on the inside is that there is "resistance" so I don't think we've seen the end of this.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Giordano — Wed, 06 Feb 2008 04:05:05 -0000

Or, Microsoft can huge its huge cash reserves to buy a majority stake in them, and catapult itsself to a leadership position on the Internet in Asia, which is a very valuable position to be in.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

david hyman — Wed, 06 Feb 2008 00:57:42 -0000

fred, you nailed it. best article on bear hug i've read yet.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

BillSeitz — Tue, 05 Feb 2008 23:48:36 -0000

Oh, I was also thinking that, rather than pile up cash to spend on acquisitions they do nothing with, maybe Google should keep a lower share of AdSense revenue made on a site, so those sites can make more money and be more viable as independent entities...

http://www.mydigitallife.in...

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Stevie Jr. — Tue, 05 Feb 2008 17:59:49 -0000

Apple and Google should cooperate to save Yahoo and keep it out of the hands of Microsoft. Yahoo may no longer be independent but at least they can take comfort in the fact that resisting their buyout will weaken Microsoft.

Apple buying Yahoo would be more acceptable to the regulators both in the US and EU.

Apple can spinoff search to Google. Google should take a minority investment in Apple to help out Apple.... say in the neighborhood of 10 billlion. A much better figure than +45bill. Sell off other units to raise cash and then monetize the hell out of FLickr on the imac / iphone / ipod. Introduce Flickr Video and make it sexier than Youtube.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Deb — Tue, 05 Feb 2008 15:53:32 -0000

You know I'm with you on this issue. But I really think that we are the minority. I can't see how a deal can solve a technology-based problem. Let's see what happens.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

BillSeitz — Tue, 05 Feb 2008 15:10:50 -0000

This seems even more pessimistic about exits for startups than your TimesAChangin recent bit.

Who's making actual operating revenue? That's sustainable/non-evil (which, according to Umair, would exclude Facebook)?

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

J.D. Falk — Tue, 05 Feb 2008 14:39:03 -0000

I'd seriously consider going back to work for Yahoo! again if they were to take this advice.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 12:15:01 -0000

It was a good analysis of the situation

I just hope your conculsion (that yahoo shareholders will take the money and run) is incorrect

fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Deb — Tue, 05 Feb 2008 12:07:32 -0000

First post on your blog Fred. I really enjoyed your insights on the deal. I wrote up about this myself:

http://www.marketvise.com/2...

What do you think?

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

may — Tue, 05 Feb 2008 12:06:14 -0000

outsourcing search to google has been the fix de jour on wall st for the past yr or so . in order for yhoo to be successful (i.e., maximize ad revs) it needs to have significant and direct relationships w/ advertisers-it has to matter to the ad community. it needs reach (a large audience) and a variety of ad products/offerings (to be able to address a large swath of advertisers). if yahoo gave up search, it would give up its relationships w/ the 500k+ search advertisers, and it would reduce the number and types of ad products it could offer to the (display) advertiser relationships it retained. outsourcing search to google may have a short term positive impact on financials and the stock, but it's bad in the long run for yhoo, IMO...

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 07:24:01 -0000

I've done that on a fairly regular basis. I think yahoo is certainly not significantly better than google and that's what they have to be to change user behavior

Fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Stan — Tue, 05 Feb 2008 06:53:37 -0000

I think that Google search results are more relevant is a myth (at least in our niche). Have you actually sat down for a couple of hours with a thought-out test set of queries and reached this opinion?

On the other hand, I think that Yahoo's search results are good because SEOs don't bother to try to game them as much, since they're small potatoes. When Yahoo gains a significant market share, they will become a target.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 06:46:01 -0000

Welcome!!!!

I hope you come back, particularly to the comments

Fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 06:34:03 -0000

I hope so too. We need something new in search

Fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 06:33:01 -0000

I don't share your view of microsoft's competitive position. They are an old line company that abuses their customers at every turn and gets away with it because of momopoly like positions in pc apps

The web is changing that and try as they might they don't have a clue about web culture or what works on the web

I think they'll regret this buy in five years or less

Fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

fredwilson — Tue, 05 Feb 2008 06:29:01 -0000

Yahoo doesn't control those assets and has very little if any impact on them

They can give that value to their shareholders as part of an overal package that is worth more than what microsoft is offering

Their shareholders can hold those assets and capture the upside in them instead of handing then over to miscrosoft

Fred

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

aces25 — Tue, 05 Feb 2008 03:03:13 -0000

I believe that AOL adds minimal value to the organic search results. Monetization will generate 10% to 20% more revenue, but Yahoo! will still have challenges competing long term with Google and MSN in search as they simply do not have the financial or human capital to compete in a very Capex and technically intensive business.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Giordano — Tue, 05 Feb 2008 02:06:28 -0000

Why spin-off Alibaba and Yahoo JP? Those are the only Yahoo units with a leadership position in their market (Yahoo JP), and sustained growth perspective in the next decade. (Alibaba). Yahoo should look at increasing its stake in them, not letting them go. The same with mobile... Yahoo has a leadership position in most of Asia.

Maybe one solution would be shifting perspective and letting go of the US-centric view, and focus on the markets where Yahoo is and can be leader.

Re: How Yahoo! Can Get Out Of The Microsoft Bear Hug

Michael Cullina — Tue, 05 Feb 2008 01:02:34 -0000

That's a great question and the answer provides a different perspective than what we've heard here so far. The answer is that, unlike Fred and most on this thread, Google doesn't dismiss Microsoft. In fact, they fear them and they do not underestimate them. Ironically, it is this alert fear that contributes to them being Microsoft's greatest competitor ever.

Yes, the acquisition is about display ads. No, the combined entity will not be stronger against Google in search. Yes, some of the Web 2.0 oriented divisions within Yahoo will be extremely frustrated. Yes, as Stone said, it's about buying time.

What you've got wrong, Fred, is that this is not like Time Warner - AOL. That was a case of a box of hammers merging with a sack of kittens. This is more like Tiger Woods eating breakfast. The meal will give him some energy out on the course against Phil, but Tiger is not planning to send the McMuffin out to golf for him. To make a more boring analogy, this is like a large scale version of the Microsoft acquisition of Vermeer [for FrontPage] back around 1997. The technology sucked and they paid $145 million for something that could plausibly be described as being worth zero, but they never regretted the deal. It helped them along the path that they knew that they needed to take.

The industry still runs at a Moore's law pace. We are on day one or day two of search. Osborne Computer, KayPro, Altos, Fairchild Semiconductor. Digital Equipment Corporation.

Microsoft does have substantial current organizational challenges [see mini-Microsoft]. It also does have a grave strategic problem. However, they are MUCH smarter and better than you give them credit for being. The "designy" and "social” and "kewl" side of Silicon Valley is dismissive of Microsoft; but they are not qualified to judge.

The reality is that there will only be two organizations in the world able to fight the key battle. You can call this "search" or you can call it the incredible future of death star data centers and super-cloud-search-parse-build-and live software and computing. So you see; Yahoo has to sell, because there is no way they can play. What happens to all the little Flickr's etc. is irrelevant.

As to who will win: for the first time ever, Microsoft has an equal. I say it's 50/50. The domain will become so important to the whole world that they may find that it’s best to end with approximately equal market shares, operating as a duopoly, so as not to spook the populace.