Or simply playing games?

It still seems that $43.6 billion dollars still isn’t enough to make Yahoo budge. Steve Ballmer has stated that if Yahoo don’t move soon Microsoft will walk away. But do you think this will really happen? Ballmer stated “Time is money. We made [that] clear in the last letter we sent.” which poses an interesting question. Microsoft states that the delay is costing money but for them to walk away would in reality cost them even more. Seriously, how much time and cash would it take for them to build a serious contender to Google?

Wrangling.

The problem is that Yahoo wants a better deal. The board has said that the $31 per share offer undervalues the company. Due to a decline in value of Microsoft shares the offer is now effectively worth $30.36 dollars. On the basis of comments from Yahoo it’s now stalemate.

Ruling the web.

Microsoft needs the Yahoo merger if it really wants to gain ground in the advertising field. The search services provided by Redmond have not made a huge impact in the market. Without Yahoo on board Microsoft faces a long, hard struggle to seriously compete with Google. “Time is money…” will be a drop in the ocean if Microsoft walks away.

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Yahoo caught in the crossfire.

Could Yahoo be swallowed up by a joint Microsoft - News Corp bid? If reports are anything to go by, yes, it may happen. Rupert Murdoch has stated that he can’t afford to go head to head with Microsoft but left the door open for a joint venture. The head of News Corp asked “Is Google really going to get control of the advertising world, and should Microsoft be supported in their attempt to try and stop that?”. Based on that question it would to be a serious offer. But will Microsoft play ball?

Based on Yahoo’s quarterly reports, due today, the logical answer would be yes. Significant rises in advertising revenue could lead the management to seek a higher bid from Microsoft. With investors balking at the sheer size of the acquisition this may not be an option. Add in a partner and everything changes. Just think of the potential: your business partner owns MySpace and you have a significant stake in Facebook. That’s the two major social networking platforms in the bag! Add in Yahoo and things look very interesting.

This doesn’t guarantee Yahoo’s success. The company has been lagging behind Google for quite some time now. To come back from such a position will be incredibly hard even with the backing of Microsoft and News Corp.

It looks like a roller coaster ride ahead.

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A future in standup comedy?

Steve Ballmer, the Microsoft CEO, put a question to 2,000 enthusiasts at a technology meeting in Seattle. Ballmer asked users of Yahoo’s search engine to raise their hands. It would appear that, when asked how many used Microsofts search engine there was a greater response from the audience. At this point Ballmer joked: “Wow! We offered 31 bucks a share.”

Don’t forget: this was a room packed full of Microsoft fans. Seems like a reasonable response to me. But the overwhelming response came when Googles name was offered as an option. I bet that left a sour taste!

To be fair, Microsoft has gained some ground in the search market rising to about to 10.2% of the market share. This leaves them in third position trailing behind Yahoo by about 4% (these figures have yet to be adjusted based on the recent reports of Yahoo’s market gains. However you look at it, Google still dominates with 69.4% of the market. Microsoft still has a long way to go.

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Is an outsourcing deal in the pipeline?

Rumours are flying that Yahoo may serve Google ads. Successful testing of the Google system has heightened beliefs that Yahoo may serve up Google advertisements alongside its search results but representative from both companies were not prepared to comment. Last week, Reuters suggested that Yahoo were positioning themselves for a possible merger with AOL Time Warner. By outsourcing advertising revenue Yahoo would be in a position to concentrate on its core brand advertising business.

Alternatives.

Microsoft recently announced an unsolicited bid for Yahoo. The offer on the table is in the region of  $41 billion. Not a small sum even by Microsofts standards. But Yahoo believes this doesn’t place a high enough value on the company and is actively seeking alternatives to the buy out. This includes the previously mentioned AOL Time Warner tie up.

Does this scupper Microsofts offer?

I don’t think so. If Microsofts bid is accepted Yahoo could pull out of the Google deal. Equally, Redmond could leave the search advertising component as an outsourced deal leaving them with a healthy, and highly profitable acquisition based on Yahoo core advertising services.

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Nipping at Googles heels.

New data released on Tuesday has shown that Yahoo Inc may be making some gains in the Web search ad market. Data for the first quarter show that spending, across a selected group of advertisers, rose from 18% - 19% to 23% of the overall market. At the same time Googles share dropped nearly 4% to 71.1%. But it isn’t all light and joy for Yahoo. A comScore report has shown that Google gained share in the search market.

Consequently, Yahoo gained 36 cents on its share price.

(Interestingly, this announcement comes at a time when Yahoo is testing the viability of using Googles advertising system to sell ad space!)

 Although Google has not released its quarterly results the slowing down in the economy may have a significant impact on revenue. Personally, I can see a rise in this area. It might sound illogical but when times are tight, as a company, you need to ensure you are maximizing all potential i.e. advertise more to pull in a smaller pool of revenue. Or do you think I’m wrong?

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Online video at a price.

Personal movies stashed on your hard drive? Want to publish them? Want the ability to restrict who sees them? If so, read on. Yahoo owned photo sharing site Flickr has announced the introduction of its new online video service. The offering will only be available for ‘pro’ subscribers who are prepared to put $24.95 up front per year. For this rather paltry sum users will be able to post videos of up to 90 seconds length to the site.

What about YouTube?

Of course, the Google owned YouTube is already providing this service for free. However, Flickr believes that their new offering, which allows the uploading of both photos and movies, will give users a far more personal feel. The main targets for this new service are amateurs and hobbyists looking for a means of sharing media. In addition, the ‘pro’ users will have the ability to restrict viewing of their personal content.

Why now?

Yahoo has been been trying to catch up with Google in the lucrative search market quite some time now. This has caused the share price of the search giant to dip over the past two years. In turn, the slump was the trigger for Microsofts takeover attempt seen in recent news reports. It would appear that this new offering is another attempt to grow revenue and help in fighting off Microsoft.

Punch drunk giant.

To be fair, Yahoo has been in thick of it for the past couple of years, taking hammer blows from all quarters but they’re still standing. Based on Flickrs loyal following, the introduction of online videos could well be a saving grace for Yahoo (or a surprising bonus for Microsoft!). Only time (and shareholders) will tell.

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More bang for your bucks - literally.

According to Yahoo, the search giant is ready for a return from the wilderness. The new ad system will not be available until later this summer and then only to a limited number of advertisers. The initial target will be newpaper publishers keen to recoup some of the losses they have experienced to online media.

‘We’re watching you!’

Apparently, the new system will use bahavioural tracking which will generate ads based on a consumers traffic patterns (pretty much the same way that Google and Microsoft currently work). This has raised some concerns around user privacy but Yahoo are confident that consumers will appreciate ads tailored to their own preferences.

But…

…what about the Microsoft offer? This may well prove to be a huge stumbling block for Yahoo. The Redmond giant has slapped a huge $41b offer on the table. Yahoo argues that this does not place a high enough value on the company (really?). In addition, Microsoft have placed a deadline on this offer. If a ‘yes’ decision is not reached by 26th April Microsoft has indicated it will launch a hostile takeover at a lower price (don’t you just love capitalism?).

What now?

Yahoo now needs to convince its investors that fending off Microsoft is a wise move. The company has produced projected revenue for 2009 of about $7.1b, a significant jump from last year. However, analysts are suggesting a more ‘modest’ figure of approximately $6.4b. Given that Yahoo touted ‘Panama’ as an end to all their financial woes last year (it didn’t) investors may well be inclined to side with Microsoft.

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