Google Ad Deal Is Under Scrutiny

The Justice Department has opened a formal antitrust investigation into a deal struck last month that would allow the Internet titan Google to provide some search advertising for Yahoo, according to sources familiar with the inquiry.
Investigators are planning to demand documents not only from Google and Yahoo, but also from other large companies in the Internet and media industries, said the sources, who spoke on condition of anonymity because the investigation is ongoing.

Google and Yahoo officials have said since the deal's announcement that they would delay its implementation for a voluntary Justice Department review. But a formal investigation signals that the department may have found some cause for concern. More>>

Microsoft confirmed an agreement to buy Powerset, one of the leaders in semantic search

As rumored last week, Microsoft, with the notion of a Yahoo deal receding quickly in the rear-view mirror, is taking another tack in its efforts to stem the dominance of Google search -- rather than playing catch up, it wants to try leapfrog. Today, Microsoft confirmed an agreement to buy Powerset, one of the leaders in semantic search, which attempts to glean the context and intent of a search rather than just matching keywords against the content of ranked pages. Details of the deal weren't revealed, but the price is rumored to be in the $100 million neighborhood. "We're buying Powerset first and foremost because we're impressed with the people there," Microsoft's Live Search blog said. "We came away impressed by their smarts, their experience, their passion for search, and a shared vision. That shared vision is to take Search to the next level by adding understanding of the intent and meaning behind the words in searches and webpages."

There are challenges aplenty in the strategy. Semantic search is a non-trivial exercise involving the honing of the technology and the re-indexing of the searchable Web, and semantic analysis of a page is much more computing-intensive than simply scanning text. On its own, Powerset had been limited to demonstrating its proof of concept in searches through the finite world of Wikipedia. Microsoft has the infrastructure and the war chest to expand that reach, first, perhaps, in vertical search categories where semantic search has done the best so far. It will be a while before the success of this approach can be judged, and there's always the chance that Google might innovate or buy its way into the same territory, but Microsoft needed to do something to try to pull its search share out of single digits, and this looks like as good a bet as any. "Microsoft's acquisition of Powerset makes perfect sense and is probably the best shot at a disruptive technology that might allow it to leapfrog Google," said Andrei Hagiu, assistant professor of strategy, focusing on technology, at Harvard Business School.

Adobe Makes Flash Searchable

For years the big problem with Flash-based websites is that they could not be properly indexed by search engines. Flash websites have been favored by marketers and advertisers for a long time, because of the ability to create rich, interactive Web experiences. However for most other businesses, particularly those with a lot of information on their website (let's face it, that's everyone except marketers and advertisers), Flash has been nearly an automatic 'no' for website development. That may be about to change.

Adobe announced today that it is teaming up with major search engines - notably Google and Yahoo - to "dramatically improve search results of dynamic Web content and rich Internet applications (RIAs)." In a press statement, Adobe said that it is "providing optimized Adobe Flash Player technology to Google and Yahoo! to enhance search engine indexing of the Flash file format (SWF) and uncover information that is currently undiscoverable by search engines."

Adobe claims that it will provide more relevant search results and rankings for RIA content. In a separate blog post, Google announced that it has launched a "Flash indexing algorithm", which will result in better search results. More>>

Yahoo Runs Into Google’s Arms

Yahoo and Google have confirmed that they are indeed entering into a partnership around search advertising, a story we broke earlier today. Google’s blog post on the agreement is here.

—The deal is non-exclusive. Yahoo will be able to run Google ads alongside Yahoo ads or other ad providers.
—The deal is expected to add $800 million a year in revenues and $250 million to $450 million in operating cash flow.
—The deal only applies to paid search and contextual ads, not to algorithmic search.

This arrangement will no doubt intensify the scrutiny from Washington, where the Justice Department has already launched an investigation into antitrust issues arising from Yahoo and Google merely testing the waters for today’s partnership. Congress might want to hold hearings as well. Back in April, Citi analyst Mark Mahaney estimated that a Google deal could increase Yahoo’s cash flows by more than $1 billion a year. It turns it will be less than that. But given the antitrust scrutiny, the deal is necessarily structured in a creative way. As part of the deal, Yahoo can decide to go with Google only for those search queries where it will get the most bang for the buck.

On Wednesday, when asked by Fox News about the antitrust issues surrounding a possible search deal with Yahoo, Schmidt responded:

Well you are presuming that there’s an issue there.

If there were an issue, it’s perfectly possible that you can do commercial deals that look like outsourcing deals which are not exclusive and where industry structures allow everybody to win. If you look in the automobile industry and lots and lots of industries like that, you have suppliers who supply other people. So if there were a deal, it would be based on those sorts of principles.

As long as the relationship is competitive, it might pass regulatory scrutiny. That is, if Microsoft can bid for Yahoo’s search advertising business as well, then whoever can deliver the most cash to Yahoo will win the business. In reality, we all know who that will be: Google. Neither Microsoft nor Yahoo can match the search dollars that Google can deliver.

Microsoft looking to buy Yahoo search

Rather than make an all-out acquisition, Microsoft Corp. has proposed buying Yahoo Inc.'s search business and taking a minority stake in the company, according to a report.

The complex deal, reported Tuesday by Reuters citing an anonymous source, would also involve Yahoo putting its Asian assets, which include sizable stakes in Yahoo Japan and China's Alibaba Group, up for sale.

The two companies revealed the talks on the weekend but declined to reveal terms of the discussions, Reuters said. The proposal represents Microsoft's current thinking and does not yet put a value on Yahoo's search business, according to the source, who the news agency said was not authorized to speak on the record because the discussions are confidential.More>>

Microsoft Gives Yahoo Deadline on Offer

Microsoft set the clock ticking for Yahoo to accept its $41 billion buyout offer in a letter to the Internet pioneer's board Saturday, warning that if a deal wasn't reached by April 26 the software maker would launch a hostile takeover at a less attractive price.

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," wrote Microsoft Chief Executive Steve Ballmer.

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," he wrote.

A Yahoo spokeswoman declined to comment Saturday.

In the letter, Ballmer said Yahoo's search share and page views, two measures of the strength of the Web portal company's business, appear to have fallen since the offer was made at the end of January. At the time, Microsoft's cash-and-stock offer was valued at $44.6 billion, or 62 percent above Yahoo's market value. Judging by Friday's closing share prices, the deal is now worth just under $41 billion.

Yahoo's board formally rejected Microsoft Corp.'s bid in February, saying it undervalues the company.

Since then, the Silicon Valley company has explored alliances with Google Inc., News Corp.'s MySpace.com and Time Warner Inc.'s AOL, but no alternative to Microsoft's offer has surfaced. More Details>>

Yahoo india sacks forty employees

Pink slips have reached India’s tech capital Bangalore with the online giant Yahoo! chopping at least 40 jobs in a single day at its development centre.

The job cuts have come as a shock for the Yahoo! India employees who were given just 30 minutes to exit their workplace. Some of the emotionally distraught employees broke down on receiving the news while others who turned restive called up ET office.

Globally, Yahoo! has unveiled workforce rationalisation putting roughly 1,000 jobs at risk. The reason cited for Wednesday’s axing of jobs was the internal performance measurement index of Yahoo!, called Relative Poor Performers (RPR). Yahoo! India CEO Sharad Sharma and the top management were not available for an interface with the employees. Further, according to sources, Yahoo! has decided to freeze recruitments in India for the time being.

Yahoo! India currently has a total headcount of 1,500 with its R&D operations solely located in Bangalore. The latest job cuts were primarily in the R&D division.Sources said that the job cuts affected up to the mid-manager level across all its segments. The affected people include developers, senior engineers and some of the relatively inexperienced people. Yahoo! India officials were not available for comment.

Yahoo rejects Microsoft, report says it may buy AOL

Yahoo Inc., which rejected Microsoft Corp.'s unsolicited $44.6 billion bid Monday as too low, wants to restart merger talks with Time Warner Inc.'s AOL unit, according to a London newspaper.

The Times said, without citing its sources, that the Sunnyvale, Calif.-based company (NASDAQ: YHOO) is exploring merger talks with AOL, as well as deals with Mountain View, Calif.-based Google Inc (NASDAQ: GOOG) or Walt Disney Co. (NYSE: DIS).

The paper reported that previous talks between Yahoo and AOL failed because of differences over price.

Time Warner (NYSE:TWX) said last week that it planned to split AOL's Internet access business from its Web portal and advertising business.

The possible Yahoo-AOL talks came as Yahoo formally rejected Microsoft's (NASDAQ: MSFT) $31 per share offer as too low. Reports over the weekend said Yahoo won't consider an offer below $40 a share, which would boost the price by about $12 billion.

In the statement released Monday, Yahoo said its board is "continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders."

Yahoo may consider Google alliance

Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday.

Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.

A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.

In a memo to Yahoo employees on Friday, which was obtained by Reuters on Sunday, Yahoo leaders wrote: "We want to emphasize that absolutely no decisions have been made -- and, despite what some people have tried to suggest, there's certainly no integration process underway."

Few natural bidders exist besides Google that could engage in a bidding war, and Google would be unlikely to win approval from antitrust regulators, some Wall Street analysts said on Friday.

The Wall Street Journal reported on its website on Sunday that Google's chief executive Eric Schmidt called Yahoo's chief executive Jerry Yang to offer his company's help in any effort to thwart Microsoft's bid. Read More>>

Yahoo rejects Microsoft's bid

Yahoo Inc on Monday rejected as too low Microsoft Corp's unsolicited takeover offer, currently valued at $42 billion, putting the ball back in the software giant's court to pursue a deal.

In a statement, Yahoo said its board unanimously concluded the proposal was not in the best interests of its shareholders.

The company said the offer "substantially undervalues" its "global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments."

Yahoo added that its board was evaluating all its strategic options.

Microsoft made the half-stock, half-cash offer on February 1. It was originally worth $44.6 billion, or $31 per share -- a 62 percent premium to Yahoo's stock price. Since then, Microsoft shares have fallen, and the deal is now worth $41.5 billion.

Microsoft now must decide whether to sweeten its offer, launch a proxy fight or simply withdraw. Read More>>

Yahoo to Reject Microsoft Buyout Offer

Yahoo! Inc., the Internet company that has failed to crack Google Inc.'s dominance of Web search, plans to reject a $44.6 billion takeover bid from Microsoft Corp., a person familiar with the situation said.

The board spent a week reviewing the $31-per-share unsolicited offer before deciding it was too low, and directors are likely to reject it tomorrow, said the person, who declined to be identified because the discussions aren't public. Yahoo wants at least $40, the Wall Street Journal reported yesterday.

The decision steps up pressure on co-founder Jerry Yang to present investors with a strategy to revive a stock that lost half its value in the two years before the offer. He may look to outsource its search efforts to Google or find another buyer, though analysts said it is unlikely that any other options will emerge and Microsoft may make a higher offer to win.

``A lot of this is gamesmanship on the part of Yahoo,'' said Scott Kessler, an equity analyst at Standard & Poor's in New York who recommends holding Yahoo and buying Microsoft. ``Microsoft is well aware that Yahoo doesn't have any other options. What this is about is how much Microsoft wants Yahoo and how much time they're willing to wait to get this deal done.'' Read More>>

Yokia! Why Nokia Should Buy Yahoo

Forget Microsoft, News Corp. or even Apple. Nokia, the world's no.1 mobile handset maker, should buy Yahoo. Or so says Information Week's Stephen Wellman, who puts forward a compelling argument: If Nokia is repositioning itself as a Web services company, to combat falling profit margins on its hardware, then acquiring Yahoo would help to give the company a much needed presence on the desktop (not just mobile), as well as beef up its Web offerings and Internet brand recognition in general.

"Nokia is now a Web company, not just a handset maker. But, the company acts as if the Web is just mobile and has no desktop component. This isn't a very smart strategy", writes Wellman. All of Nokia's mobile web rivals: Google, Microsoft and, of course, Yahoo all have desktop products.

"These Web giants are leveraging their vast desktop Web audiences to grow their mobile initiatives. While Nokia has tons of mobile phone customers, it doesn't have as many Web application users", notes Wellman. Read More>>

Yahoo seeking ways to avoid Microsoft takeover: Jerry Yang

Yahoo chief executive Jerry Yang sent a message to employees on Wednesday, assuring them the firm's leaders are exploring ways to avoid a takeover by software giant Microsoft.

In an email to Yahoo workers, Yang said the board of directors has yet to decide how to respond to Microsoft's offer to buy the veteran Internet company for $44.6 billion in cash and stock.

"Our board is thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape," Yang wrote in the email, which was filed with the US Securities and Exchange Commission.

"What's become clear in the past few days is how much people care about this company. I've heard from many of you, and from other friends and colleagues from around Silicon Valley and across the globe, that we need to do what's best for Yahoo and our shareholders."

Microsoft's unsolicited offer to pay the equivalent of $31 per share for Yahoo highlights the 14-year-old California firm's potential to recapture past glory, Yang told employees.

Microsoft publicly announced what it billed as a "generous" offer for Yahoo on February 1 and said its plan is to combine resources to take on Internet powerhouse Google.

Google has come out against the proposed takeover, condemning it as an attack on the freedom of the Internet.

Yahoo has said little more than its board is carefully reviewing options that include keeping Yahoo an independent company.

Yahoo has received calls from "a number of interested parties" and has a wide range of strategic options, a source close to Yahoo told media.

Those options include outsourcing online advertising to arch-rival Google, a proven master at pumping revenues from that well.

If it spurns Microsoft's offer, Yahoo's board of directors will be under pressure to give stockholders a soothing cash payout or even borrow money to buy back shares and turn the firm private.

The offer comes as Yahoo is losing ground rapidly in the Internet space to Google, the search leader which has cashed in on the market for online advertising.

Yahoo announced plans last week to lay off 1,000 workers, seven percent of its employees, as part of an effort to reallocate resources and bolster its bottom line.

Why Microsoft Needs Yahoo: The Real Story

So one day, Scott McNealy, founder and chairman of Sun, read in his morning newspaper how the use of Java was rapidly diminishing, courtesy of something called 'The LAMP Stack'. Furiously, he called his accountant.

Scott: "I knew this Java thing was a bad idea in the first place! I see only one solution. We need to buy this Lamp!"
Accountant: "Euh, LAMP is not a company. It's an acronym. It's Linux , Apache, MySQL and PHP"
Scott: "Then buy me Linux!"
Accountant: "But we still have this Solaris thing.."
Scott: "Then buy me Apache!"
Accountant: "That's a foundation. Nothing to buy there."
Scott: "Then buy me MySQL!"
Accountant: "We don't do databases."
Scott: "It's a database?"
Accountant: "What rock have you been living under?"
Scott: "Sweet. I can own the Lamp AND piss off Oracle at the same time!" (waves fake plastic magic wand) "Make it so!"

And so it happened.

Read Original Story>>

Apple among those considering rival bid for Yahoo?

Global giants including Apple Inc. and Rupert Murdoch's News Corp. are considering rival bids for the internet search icon Yahoo, which has received a $44.6 billion offer from Microsoft, the Scotsman is reporting.

Though the report cites no sources, it points to a statement on Yahoo's website that says that company will seek acquisition proposals from other companies, evaluate all of its strategic alternatives, and then "pursue the option that it believes can best maximise value for our shareholders."

In addition to Apple and News Corp., several other firms are reported to be unwilling to allow Microsoft to gobble up Yahoo without a fight, including American media conglomerate InterActiveCorp and leading Chinese search firms such as Alibaba.com.Read More>>

Yahoo may consider Google alliance

Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday.

Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.

A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.

In a memo to Yahoo employees on Friday, which was obtained by Reuters on Sunday, Yahoo leaders wrote: "We want to emphasize that absolutely no decisions have been made -- and, despite what some people have tried to suggest, there's certainly no integration process underway."

Few natural bidders exist besides Google that could engage in a bidding war, and Google would be unlikely to win approval from antitrust regulators, some Wall Street analysts said on Friday. Read More>>

Yahoo, MS deal a challenge for dotcom cos in India

A potential combination between Microsoft and Yahoo! is likely to erode online advertisement revenues of some small dotcom companies in India while Google could lose some of the pricing power in the country, industry watchers said.

The presence of two strong content aggregators will also make the market tighter for full-range content behemoths — horizontal Web portals — that largely depend on online advertising revenues, they said. Already, the likes of Sify are moving away from the horizontal portal model and are trying to offer transaction-based services.
“Google has achieved a strong position in the Indian market as far as ad spends are concerned, which means that a majority of the effects of the acquisition would be reflected on the desi players,” said online research and advisory firm JuxtConsult co-founder Mrutyunjay Mishra.

Estimates suggest that Google, Yahoo! and the distant third MSN together command about 75% of online advertising budgets in the country, valued at about $120 million. “The merger would ensure the survival for MSN and allow the online branch of Microsoft to move to an ad-driven model, much popularised by Google,” said digital marketing firm Pinstorm CEO Mahesh Murthy. Read More>>

Google to Oppose Microsoft, Yahoo deal

Google does not much like the fact that Microsoft is making a bid for internet portal firm Yahoo! . So the world's largest search company has decided to start a PR campaign to get the government to kill the deal.

In a blog post, Google Senior Vice President David Drummond, asks whether Microsoft could "now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC," according to The Wall Street Journal (subscription required). Microsoft immediately took the other side of the argument by saying that Google dominates the global search market. A purchase of Yahoo! would not knock Google out of the No.1 spot.

The bickering over the matter probably makes little difference. Google is so powerful now in internet search that Microsoft may not make much progress there even by owning Yahoo!. There will be all sorts of integration problems if its bid goes through. Google probably will keep gaining search share in the meantime. The government knows all of that. There is little reason for them to oppose the deal.

Yahoo! Doesn't Have What Microsoft Needs

Microsoft and Yahoo! have a big problem. Online ads are booming, and they are getting left out. Microsoft's online business racked up a loss of $248 million during the quarter ending in December. Yahoo! makes money, but its earnings are slipping fast: Net income fell 23 % to $205.7 million last quarter from $268 million during the year-ago period.

Little wonder Microsoft (nasdaq: MSFT - news - people ) bid for Yahoo! (nasdaq: YHOO - news - people ) Friday. While Google (nasdaq: GOOG - news - people ) sucks up the money flowing into online advertising, its two online rivals grow weaker. On Wednesday, Google reported a 17% jump in earnings to $1.21 billion over the year-ago period.

But if search advertising is raining cash down on Google, Microsoft's attempt to fix the problem by buying Yahoo! is like running out into the street and trying to capture some of the downpour with a fork: It's the wrong tool for the job. Call it reverse synergy--both Microsoft and Yahoo! are weak where Google is strong, in search and search advertising. read full story

Is this Bill Gates' last big throw?

Microsoft's proposal to buy internet veteran Yahoo for a whopping $44.6bn (£22.4bn) certainly grabs the attention.

But does it make business sense?

In a way this won't be the Microsoft founder's problem. This summer Mr Gates will leave the company to work full-time on fighting global poverty and diseases like Aids, Malaria and TB.

But the Microsoft managers who have to make it work will be asked whether this is a case of one failing giant trying to prop up another.

The Google factor

Yahoo has been on the ropes for a long time.

Once the top dog of the internet, the company has been haemorrhaging users and money. With advertising income not anywhere near where it should be, Yahoo's share price is stuck in the doldrums.

Last June Yahoo's board chucked out chief executive Terry Semel and brought back co-founder Jerry Yang to recapture the firm's dominance - to little avail. read full story