Category Archives: yahoo

Microsoft offers to buy Yahoo

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I’m feeling kind of smart today after feeling stupid *yesterday*.    I had doubled my Yahoo stake before the earnings call, wrongly thinking that a good report was in store.     However just fair earnings and poor guidance knocked the stock back a few dollars the next day.     But it’s surging today as Microsoft has offered 44.6 billion for Yahoo, effectively making it worth a lot more than yesterday.

Perhaps the price hit after earnings drove Yahoo to some sort of strike point for Microsoft.    At CES I  think I may have been right to suggest there were high level meetings between Gates and Yang regarding a Microsoft Yahoo Merger , clearly MS must have been thinking about this for some time.  Rumors have been swirling for over a year.

Yahoo carnage coming at conference call.

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As a Yahoo enthusiast and shareholder it’s been hard to watch the company struggle so hard over the past few years only to lose ground to Google, especially because Yahoo’s social networking efforts and web 2.0 initiatives have in most ways been superior to Google’s.    Flickr is the best example of a superb Yahoo application that is more used than Google’s Picasa (which is also excellent but was late to the scene so most early adopters are sticking with Flickr, which is somewhat better anyway in my view).  

Henry Blodget at Silicon Valley Insider is reporting that Yahoo will proceed soon with the drastic layoff scenario – rumored to be some 1500-2500 people.

Human issues aside, this will likely be very good for the stock price and company’s future prospects.    Google learned early on that the key to profitability was scaling up systems without comparable scaling up of staff.   Google thus leveraged the incredible efficiency of computers to generate more profits.   Yahoo, on the other hand and especially with Terry Semel in charge, sees themselves as more of a media and content producer with all the labor intensiveness and lack of internet efficiency that approach entails.    Google was right, Yahoo was wrong.    Even Google’s own Youtube, a masterpiece of creating cheap content without staff, is struggling to monetize all the content and traffic.    

I’m oversimplifying the relationship of content production to profit here, but in general terms I continue to believe that the expression “content is king” was *never* true on the internet, and that in many ways sticking to this mantra cost Yahoo a big part of the ballgame.    Yahoo actually used Google search as Yahoo’s search tool for many years, and could certainly have aquired Google in the early days for millions of dollars rather than becoming eclipsed by Google which now has a market capitalization of about five times Yahoo.   Why didn’t they do it?    Google was “search”, not “content”, and Yahoo foolishly believed content was king.    

Content is a pawn in the big online chess game, and don’t forget it.    

Trickles of web content to become floods, sweeping away the cable industry? Maybe.

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Henry Blodget at Silicon Alley Insider has a good insight about the threat to cable from online feeds, which are now a trickle but could become a flood.    Blodget notes about the agreement between Yahoo and CNET:

… cable companies, meanwhile, depend on monopoly access to networks like CNBC and cannot afford to be circumvented by, say, a live CNBC web feed (lest a web trickle become a flood)…

I think Cable still has a viable future for at least the next 5 years because convergence of media is going to take a lot longer than most think, and if Cable is smart they’ll find ways to be the key broadband conduit into the home as they already are for millions of American homes.    It seems to me that the internet is more threatening to information driven media like newspapers than it is to entertainment driven media.   The is partly just a bandwidth issue – currently it’s not realistic to expect people to buy, configure, and use the fledgling broadband movie services.     How soon will this change?    5+ years in my estimation.   Of course eventually super high bandwidth streaming into most homes will be the likely main paradigm for home entertainment, but this won’t happen for some time.   We are too stubborn to innovate nearly as fast as technology allows.

Yahoo! WAKE UP!

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It’s very frustrating being a Yahoo shareholder.

Not because Yahoo isn’t a good company, in fact Yahoo is a *great* company.

Not because Yahoo doesn’t seem to “get it”, Yahoo arguably “gets it” better than almost all other companies in terms of Web 2.0, the social networking space, and in terms of the importance of open architectures and developer support.

Not because Yahoo doesn’t have any of the lucrative search market share. They are the clear 2nd place in search with huge search activity and over 20% of global internet search traffic.

It’s frustrating because despite all the advantages, Yahoo just can’t seem to capitalize on all these advantagesto turn a good buck, monetize the site to full potential, and increase my share price. Google, with total traffic levels about the same as Yahoo, has a stock capitalization some *FIVE TIMES* that of the company with arguably very similar potential for profits.

Little internet companies and even many very big ones have a good excuse for failing in profitability – online biz is a cold and cruel world and for all the but the huge players everything can turn on a dime. Yahoo, on the other hand, has no good excuse for failing. They are a market maker in terms of online search, global internet reach, online video, and …. this just in for me …. they are HUGE in the Social Networking space. Yes, that would be the social networking space everybody is so excited about. What do I mean by HUGE? Let’s review this graph from Compete.com via TechCrunch.

First we need to note that Compete.com is not even remotely a perfect measure, and also adding “unique visitors” in this fashion is counting some folks twice. Also, they are listing sites like Geocities that are arguably not social sites, though I’d argue they could be “open socialed” quickly with an effort in that direction. Since the overlap at these traffic levels is probably not a very big deal, and also assuming they spend time as if the Yahoo properties are separate sites their ad potential may be the same as if they were different folks, these numbers are important and relevant.

So, the big players first:

Myspace: 72 million unique visits in October

Facebook: 33 million

Yahoo: 38 million …..

<screeching reverse halt noise here>

What? Yahoo has more social traffic than Facebook?! Yes they do if you add Flickr and Geocities and Yahoo Groups.

Aside from the fact that Caterina and Stuart and the Flickr gang are probably thinking they sold out a bit too cheap at only 20 million, Flickr is an astounding success with some 14 million users and growing. Personally, I’d rather hang out at Flickr than Facebook anyway.

So, where does this huge number of users in the Yahoo social networking juggernaut leave us?

Frustrated baby, frustrated……

Bhatia’s battle to give you free software … Game ON!?

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Over at Webguild I noted a really interesting quote from Sabeer Bhatia, co-founder of HotMail, who suggested very recently that shrinkwrapped software is dead and everybody is going to go online for their office and other applications by 2010.    Consistent with this hypothesis and blustering claim, Bhatia has just launched a new online suite of MS office-like tools.   

Sridhar over at Zoho blogs is really taking Bhatia to task for suggesting that the new product, Instacoll, might capture 1% of the market.   Of course Zoho is not exactly a fan of Instacoll which is a very direct competitor to their offerings, but Sridhar’s point is that venture capital people don’t want companies to shoot for 1% of a market – they want it all.

Frankly, I’m not convinced by any of these points.  People are stubborn with changes.  So first, I think Microsoft will keep plugging along and shrinkwrap will die a slow, not quick, death.   Microsoft’s version of online office tools will be in the best position to win in this game because if they do it cleverly they will slowly transition a huge customer base from Word and Excel and Access over to the online environments and find ways to make money during and after the transition.    

Second, only Microsoft and Google with maybe Yahoo as a distant runner up shot, are likely to capture the online document market.   Why will people choose Instacall or Zoho when they can go with the big guys?    Assume you have three free parties and you are invited to all of them.   They all have a nice dinner for you with similar food, and all are just around the block.   One is at my house, the other at your friend’s house,  and the other at Bratt Pitt and Angelina Jolie’s place.    You are going to Brangelinas, just like you are going to use Google docs.    1% of the office market?   Maybe, but what are you having for dinner again?

Blodget: Microsoft implying they may be poised to buy Yahoo

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Henry Blodget’s got an interesting take on the recent UBS talk by Microsoft where they suggested a plan to capture “30-40%” of the search market over the next several years.  Although the literal reading of this does not seem to suggest a Yahoo buyout, Blodget is correct that it is simply absurd, even given the normal Microsoft bluster factor, for Microsoft to think they can capture this much of the market in a short time …. unless they buy Yahoo, which as Blodget points out gives them all this, and more, instantly.  

Given Yahoo’s modest capitalization of some 30 billion, and Yahoo’s huge online prospects (they have similar traffic to Google but with far poorer monetization of traffic), it would not be prohibitive for Microsoft to nab them.

I’ve noted before this would be an excellent move for Microsoft.  It still is.

Disclaimer: I’ve got some Yahoo shares.   Not that they are doing me much good right now.    But they’d probably jump in value if Microsoft bought them.   Did this influence me writing about this?   I don’t think so, but since money is the root of all evil you can’t really trust me on Yahoo analyses, disclaimers or not.   Also important is that nobody can predict the market swings with any forward looking reliability.   So there. 

Email as the new Social Network

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The New York Times is summarizing some interesting plans from Google and Yahoo to turn their email systems into forms of social networking.    This idea could have a lot of potential, as the Yahoo’s Brad Garlinghouse points out in the article that Yahoo has a lot of information about an individual’s social relationships – for example who they email regularly – and this info is simply begging to be mined to help users navigate their increasingly complex online worlds. 

Google as Social Network = THE killer application?

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Google’s acting social at the Googleplex and this could become an earthquake in the social network landscape.   TechCrunch reports that Maka Maka appears to be the Google codename for their social network integration, which may be a way to tie together existing Google stuff in a seamless and user friendly way.   For many of us Google aleady has a lot of info.   I use Gmail, Google Toolbar, and more.  If they simply say to me “click here and we’ll make it all work great” I’m going to do it.    If it works, I’ll keep it.  If I, and 50,000,000 other users keep it Google will be bigger than Facebook….almost overnight.  If they integrate it all with the upcoming Google Phone?   Wow.

TechCrunch:
The real killer app for Google is not to turn Orkut into a Facebook clone. It is to turn every Google app into a social application without you even noticing that you’ve joined yet another social network.

Hey Yahoo!   Why don’t you DO THIS!    Use Mash to get all Yahoo users going.  Don’t ask others to sign them up – simply have a  one click Mash page creation thing where YOU set up a page for all Yahoo users…..right NOW.    If people want to delete it, fine.  If not, rock on with the new largest social network, and populate it with people …. later.

San Jose Mercury News – A Cautionary Tale from Business Week

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There is a great summary at Business Week of the  remarkable rise and pending fall of Silicon Valley’s newspaper – the San Jose Mercury News.     They note 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, to me 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 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 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 changes coming more from scratch than from a slow simmering of existing ideas.     This also helps explain the challenges of Venture Capitalism in finding “the next big thing”, which may right now only be known by the glimmer in a college kid’s eye.

If so, who is next?

Yahoo Mash – Yahoo!, don’t forget about Yahoo! Mash

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Yahoo’s social networking tool “Yahoo Mash” offered up a good first entry into the social networking space by a major player.    But I’m noticing how it seems to be languishing after the initial positive buzz, and I think this is because Yahoo’s taking too long to go out with full bore, full online network promotion.  

Yahoo Mash offers some features I really like compared to Myspace and Facebook.  It’s an open architecture meaning that you can mashup mash with modules that show pictures or RSS feeds like this blog.   I think my favorite thing about Yahoo Mash is the way the comments stream from profile to profile, so you don’t have to keep bouncing back to a single spot to remember what you said to somebody.    I’m not enough of a social networking person to know if this is a real innovation or not because Myspace and Facebook also have some features that cross pollinate across profiles, but somehow Mash feels more like a “social networking” experience to me, even though I with it had the kinds of business networking features you find at LinkedIn.  

If Yahoo Mash is just working out kinks and getting ready to scale up to full release soon that is fine, but if the idea is to scale the project *slowly* over a year or so I think they are making a big mistake.  Why?   Because social networking is an explosive phenomenon both in the sense that it has quickly become a key online activity across all users but also because it seems to me that social networks don’t gain momentum gradually, rather they become “in fashion” as did Myspace and Facebook and grow quickly and explosively.   Facebook is still in this growth mode while I think Myspace growth is tapering off (I’m too lazy to go look at graphs to see if this is true).  

Disclaimer – I’ve got some Yahoo stock.  Not enough to prejudice my views, but perhaps enough to make me unreasonably optimistic.