Google Considers Yahoo bid

Google has talked to at least two private equity firms about potentially helping them finance a deal to buy Yahoo Inc.'s core business, according to the Wall Street Journal.

Though it is obvious why Google would want access to Yahoo's display advertising business, any such deal would immediately trigger antitrust review.

In 2008 the Federal Trade Commission nixed even a search advertising partnership between the companies. Perhaps Google thinks it could strike a deal to spin off the Yahoo search business, which is the likely source of antitrust concern, and just keep the portal operations.

Google, Private Equity Firms Mull Bid For Yahoo

Bing,Grows Share of U.S. Searches by 50 Percent

A year after the official relaunch of its search product under the "Bing" brand, Microsoft's share of U.S. searches has grown by 50 percent, according to data from comScore.

The firm estimates Microsoft's sites accounted for eight percent of U.S. searches in May 2009, but that the company grew its share to 12.1 percent of searches in May 2010. That represents a year-over-year growth rate of over 50 percent.

Over the same period, searches on Google and Yahoo properties dropped by 1.3 percentage points and 1.8 percentage points, respectively, with Ask and AOL sites also losing searches. Data for Google sites does not include searches on its video site YouTube.

With Bing, Microsoft Grows Share of U.S. Searches by 50 Percent - ClickZ

What is Yahoo's Strategy?

I admit I'm not sure I describe, with certainty, Yahoo or AOL strategies. To be sure, I'm not sure I could adequately describe Google's fundamental strategy, either. Maybe it doesn't matter whether I understand it. But it typically does matter when a company is a bit fuzzy about telling its own story. You can be the judge of whether this is clear enough.

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Slight Skews to Google, Yahoo Search User Demographics

The Yahoo search engine is slightly more often to be used by younger users; Google slightly more often is used by older users. But the overall patterns are pretty similar.

The real difference is that Google accounted for 65.98 percent of all U.S. searches in the four weeks ending January 26, 2008. Yahoo! Search, MSN Search and Ask.com each received 20.94, 6.90 and 4.21 percent respectively. The remaining 48 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.97 percent of U.S. searches.

Google: Microsoft "Troubling Questions"

Google is doing what it can to annoy Microsoft. Reportedly it has contacted Yahoo about potential help fending off a Microsoft takeover bid. And it certainly is going to raise antitrust and other competitive issues it hopes will be addressed by regulatory bodies.

"Microsoft's hostile bid for Yahoo! raises troubling questions," says David Drummond, SVP and Chief Legal Officer. "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?"

"Could the acquisition of Yahoo! allow Microsoft, despite its legacy of serious legal and regulatory offenses, to extend unfair practices from browsers and operating systems to the Internet?" he asks.

"Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

Will Yahoo Get Another Offer?

Will a Yahoo white knight emerge? Financial blogger Henry Blodget thinks it is possible. Now that Microsoft's bid has put Yahoo into play, there's speculation that Yahoo will try to escape Microsoft's clutches by turning to a private equity firm. Observers recently have doubted that any public company would be able to justify buying Yahoo. Apparently the growing size of private equity deals now makes even a private buyout conceivable. Look for more Yahoo layoffs if that happens.

Yahoo still gets lots of traffic, but is not growing revenue as fast as Google, as this data from 2007 illustrates.

How Microsoft-Yahoo Stacks Up with Google

Erick Schonfeld, TechCrunch do-editor, lays out the revamped Microsoft this way, back of the envelope: Google stacks up at $15.6 billion in annual revenue, compared to $65 billion annual for Microsoft combined with Yahoo. Microsoft winds up earning a $38.3 billion annual gross profit, compared to Google's $9.9 billion. Still, ask yourself who you'd rather be: Google or Microsoft-Yahoo?

Why Microsoft Wants to Buy Yahoo

Putting the assets together boosts combined search market share to 36 percent, compared to Google's 53 percent, giving Microsoft-Yahoo a fighting chance to compete in a market that will not support any other serious contenders for leadership.
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Roughly the same logic holds for other Internet applications where the three companies compete, or might like to. Microsoft is a contestant in the MP3 music player business and never has been able to challenge Apple. Maybe the Yahoo assets somehow can help Microsoft do better in the music or video download markets.

As you would expect, Microsoft argues there are significant benefits of scale in advertising platform economics, capital costs for search index build-out and in research and development that it will benefit from.

True, though part of the broader problem is the sheer range of competencies the companies require, the markets they participate in, the media types they support and the ecosystems each has to find a way to fit into. The problem is that the places Microsoft might potentially have to compete are so diverse.

There's ad placement, blogging platforms, collaboration, software development, mapping, location services, mobility, peer-to-peer distribution, photo sharing, social networking, communications, video, enterprise applications and analytics, for example.

Search is the obvious place Microsoft gains mass. One cannot yet forecast how well the Yahoo assets will help in all the other areas.

There's danger of another sort here for Microsoft as well. Never before as Microsoft made such a large organization. And there's a cultural issue as well. Though it never is easy to integrate two or more companies, there's an additional problem here. Yahoo has become a lehargic company that can't seem to innovate, and can't seem to move fast even when it knows where it wants to go.

Microsoft, on the other hand, no longer is a fast-moving company, either. In the Web services area, it has shown no ability to seize market share and momentum sufficient to wrest leadership from Apple or Google or Amazon, for example. In fact, it is precisely frustration with Microsoft's inability to seize leadership that prompts the "buy share" strategy.

Putting two slow moving or arguably ineffective companies together does not seem a recipe for reinvigorating innovation within either of the two former companies. Sure, it buys Microsoft market share in the search market. Whether Microsoft will be able to do anything with its new assets is the question.

Microsoft's desktop and office productivity software businesses remain formidable. It simply isn't clear whether those assets help Microsoft so much in the ad-driven search business.

Yahoo Launches Mobile Developer Program

Yahoo has announced a new mobile homepage and an updated version of Yahoo Go, the company’s downloadable mobile program. It also is launching a developer platform that will allow outside applications to be built for both offerings. And no, Yahoo executives are not pitching the moves as a response to Google's Android and Open Handset Alliance initiatives.

The idea is to make the company’s mobile destinations a one-stop shop for wireless users, in part by by opening them up to third-party applications.

Newspapers Not Dead Yet

But the trend line is clear enough. Newspaper advertising has been declining for decades.

But changes of this sort, where some older ways of doing things are replaced by newer ways, can take quite some time to play out, and will inevitably create new opportunities.

"Long distance," for example, has been in a long rate-per-minute decline, but usage has continued to climb. That meant the strategic task for every AT&T executive for years was simply to moderate the decline to the extent possible and prepare for some new business model.

The difference between long distance calling and newspaper advertising revenue is that newspaper ad volume is not rising, as long distance calling continues to do.

But the newspaper ad market is sizable enough that it still offers opportunity for players such as Yahoo, which has a deal with seven newspaper chains representing 176 daily papers across the country.

Yahoo is sharing content, advertising and technology, initially by newspapers posting their classified jobs ads on Yahoo’s classified jobs site, HotJobs, while newspapers use HotJobs technology to run their own online career ads.

Over time, the intention is to optimize newspaper content for search and indexing on Yahoo.

Yahoo, America Movil 143 Million Sub Mobile Search Deal

Yahoo and Latin America's top mobile phone company America Movil said on Thursday they have struck a deal to provide mobile Web services to 16 countries in Latin America and the Caribbean.

Yahoo's oneSearch service will be the default on America Movil's wireless carriers' portals. Yahoo plans to offer localized versions of oneSearch for each region, and said other Yahoo services may be added in coming months.

The partnership is the largest of the 21 search deals Yahoo has announced this year with mobile phone operators, the Sunnyvale, California company said.

Mexico City-based America Movil has 143 million wireless subscribers. Yahoo's broadest previous deal was with Spain's Telefonica SA, covering up to 100 million subscribers in several European and Latin American markets.

Search Surges

U.S. users posted a new record for the number of search queries performed on the top engines in November, with over 8.1 billion discrete searches. That’s roughly 48 monthly searches per person on average and 12 more monthly searches than the 36 per month that Compete estimated for November 2006.

Personally, I think I do something more like 48 searches an hour!

at&t Renegotiates Yahoo Deal

at&t says it is close to renegotiating a contract with Yahoo Inc. that undoubtedly will result in Yahoo earning less money. Under the current deal, Yahoo earns as much as $250 million a year of revenue. The renegotiation is expected to affect other deals Yahoo has with other telecom service providers.

The renegotiation is a reminder: large telcos often partner with other entities when entering a new market, and sometimes move slowly in those markets. That doesn't mean the relationships are stable. Ultimately, as they acquire the skills they believe they need, and scale, some partners aren't so important and "value" moves back inside the service provider organization.

There sometimes is a perception by outsiders that telcos are too "dumb" or "too slow moving" to dominate new markets. On the contrary, telcos are big enough, and smart enough, to wait for markets to develop before making a move to dominate. It's a business strategy, not an indication of "not getting it."

Google Dominates Search Even More This Year

Google accounted for 65.10 percent of all U.S. searches in the four weeks ending December 1, 2007, according to Hitwise. Yahoo! Search, MSN Search and Ask.com each received 21.21, 7.09 and 4.63 percent respectively. The remaining 46 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.96 percent of U.S. searches.

As you might expect, search engines also continue to be the primary way Internet users navigate to key industry categories. Comparing November 2007 to November 2006, the travel, entertainment and business and finance categories showed double digit increases in their share of traffic coming directly from search engines.

Another Ridiculous Patent Suit

Technology Patents, a Maryland entity having its principal place of business in Potomac, Md, (address P.O. Box 61220, Potomac, MD 20859, http://www.arismardirossian.com/), has filed a patent infringement suit claiming that 131 carriers, handset suppliers and application providers have infringed a patent covering global transmission of text or short message service (SMS) communications.

Technology Patents alleges that all of the defendants, which include T-Mobile, Vodafone, China Resources Peoples Telephone Company Ltd, AT&T, Samsung, Palm, Microsoft, and Yahoo! (among the 131 defendants), have caused international text or SMS messages to be sent to and from Maryland, thereby resulting in infringement of the asserted patents in Maryland.

TPLLC has asked for a permanent injunction against the defendants, enjoining them from providing international messaging operations and capabilities in the U.S. market.

My views on this, as previously mentioned, are that there is way too much use of "patents" as a business weapon or means of extortion, and too little use of patents as a genuine way to spur the formation of intellectual capital. We aren't talking about one or two "infringers." We are talking virtually the entire global telecommunications industry here. Can that possibly be the case? Or is this yet another example of "prior art" that should never have been given patent status in the first place?

It's crap.

BT Gets Jabber

Jabber, Inc. BT Group has selected the Jabber Extensible Communications Platform (Jabber XCP™) to provide instant messaging for BT's 21st Century Network (21CN) program. Jabber will license software to BT for consumer, government, and enterprise users worldwide. In addition, the engagement between BT and Jabber includes consulting and development services which will fully integrate the Jabber XCP platform into BT’s common capabilities network.

Integrating Jabber XCP will allow BT to extend messaging across applications and services, providing BT customers with a centralized view of message routing, one-to-one IM, group chat, offline messages, message history, file transfer, and interoperability with other messaging systems such as Yahoo!, MSN, Google, and AOL.

The 21CN program, BT Group’s ongoing network transformation project, will replace the United Kingdom’s incumbent Public Switched Telephone Network (PSTN) with an Internet Protocol (IP) system while facilitating additional services such as on-demand interactive television, mobile television, and mobile radio.

New Yahoo! Mail Launches

Yahoo! Mail has launched in the U.S. market. The updated former email client expands the Web mail service into a "social communication" tool, adding the ability to send text messages to cellphones directly from e-mail. The latest update also illustrates a trend: "communication" and "content" apps are blurring and blending. At the same time, communications are shifting, in part, into the context of social networking sites, where communications is a "background" feature always available, and where the current willingness and ability to communicate is known to each social network "buddy."

Yahoo! also has tweaked the interface to make it easier for people to go back and forth between email, instant messaging and text messaging, and to access content from inside the client itself.

The new service includes two real-time communication features that are the first of their kind from a leading Web mail service. These include the ability to send free text messages from Yahoo! Mail to mobile phone numbers in the US, Canada, India, and the Philippines, and the ability to send instant messages (IM) from Yahoo! Mail to members of the world's largest combined IM community, including users of Yahoo! Messenger and Windows Live Messenger2.

The new Yahoo! Mail enables people to select how they want to communicate with their online contacts: by e-mail, instant message or text message to a mobile phone number.

U.S. users now can right click on underlined dates, names and keywords within messages and take additional action, such as adding events directly to their Yahoo! Calendars, adding friends to their Contacts, immediately viewing a Yahoo! Map of an address or performing a Web search on a keyword.

Yahoo! says the client will operate with the speed and responsiveness of a desktop application. A co-branded version of the new Yahoo! Mail will also be available in the fall to customers using the following broadband Internet services: AT&T Yahoo! High Speed Internet, Verizon Yahoo! and Rogers Yahoo! Hi-Speed Internet. The new Yahoo! Mail will be available this fall to Yahoo! Small Business Mail users as well.

Discovering Business Models

The problem with discovering business models is that what works for some does not work for all. Back in 1998 and 1999 the stock answer provided by just about any competitive local exchange carrier executive essentially was that the firm in question would get "one percent of a $250 billion market."

These days people ask how Facebook, messaging, collaboration, video or other portals will make any money. The most popular answer is some variant of the old CLEC standby. U.S. advertising currently is about a $153 billion a year business. Portal X will get one percent of that.

Look, it clearly works for four companies: Google, AOL, Yahoo! and MSN. The "four horsemen" get about 60 percent of all Internet advertising. It isn't going to work for most application, communications or portal providers, just as it never worked for most CLECs.

The biggest two "CLECs"--the former AT&T and WorldCom/MCI--threw in the towel in defeat. And those two had more than 40 percent of all "CLEC" revenues between them.

So people assume that fast-growing and useful sites such as Facebook will find some way to make money besides traditional advertising. And there is precedent for such discovery.

Google was equally clueless about its business model, but managed to discover one.
So just because a company has no idea how it will make money, doesn't mean it will not discover a means.

On the other hand, that doesn't mean it ALWAYS will find the answer. And though I'd have to say I am fairly confident Facebook will discover a model, as Google did, that doesn't mean thousands of other sites will be so lucky. Thousands of sites obviously cannot use the Internet advertising model, even if it is fast growing, because most fo the rewards will go a relative handful of companies.