Tag Archives | Yahoo

DOJ Investigates Microhoo

Posted by David Worthington on September 11, 2009 at 3:39 pm

The U.S. Department of Justice is placing the Microsoft-Yahoo search partnership under greater scrutiny, according to reports. The DOJ is allegedly requesting more information about ad pricing, product plans, and search engine investments.

Microsoft was prosecuted in the 1990s for abusing its monopoly position in the desktop operating system market, so it comes as no surprise that the company is operating under the long shadow of government regulators. However, in the search engine area Microsoft is playing underdog to Google, which comScore reports held 64.7 percent share of the U.S search market in July.

In comparison, Microsoft’s Bing and Yahoo have a combined 28.2 percent share. If the deal is approved, Microsoft will be in a position to claw its way up to compete with Google. The company is rumored to be preparing to launch an upgrade to Bing before the end of the month, and is spending profusely to promote Bing.

The only people who have any right to be upset about the deal are Yahoo’s shareholders. Shortly after the deal was announced, some shareholders began to cry bloody murder over Yahoo’s use of the Bing search engine for nothing in return.

Further, Yahoo did not receive an upfront payment to make the deal happen, as many Yahoo investors had hoped. The deal’s complexity also makes it unlikely that any company other than Microsoft will be able to acquire Yahoo over its 10-year duration. None of that concerns the DOJ.

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The Press Releases of the Damned!

Posted by Harry McCracken on August 18, 2009 at 12:22 am

The Press Releases of the Damned

In the land of the press release, all news isn’t good news–it’s fantastic news. Every product is revolutionary. Each corporate merger is historic. Even layoffs are masterstrokes that will turn around troubled companies. When the stuff announced in press releases hits the real world, the results can be surprising, disappointing, and occasionally catastrophic. Yet the releases remain available in online archives, remorselessly documenting the initial irrational exuberance.

Herewith, seven press releases that turned out to be less than prophetic–all in excerpted form for the sake of brevity, and all annotated with the facts as they actually transpired in the days, weeks, months, and years after the releases hit the wire.

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Yahoo Was a Search Company. The Original One.

Posted by Harry McCracken on August 7, 2009 at 10:55 pm

Yahoo LogoDo you remember the first time you searched the Web? I do. In vivid detail. It was in late October or early November of 1994, in a conference room at PC World. My friend Pete Loshin showed me a new site that he explained could find information on the Internet. I performed this query as a test, and was amazed by the results. Which probably amounted to all of ten or fifteen sites–but hey, we’re talking 1994.

The search site was, of course, Yahoo–the site that introduced the world to the idea of finding stuff on the Web, and prospered by doing so. So I’m puzzled (along with others) by new Yahoo CEO Carol Bartz’s statement to the New York Times that Yahoo has “never been a search company.”

Okay, I’m not completely surprised. Yahoo stopped being focused entirely on search pretty early on. It tended to outsource aspects of search to competitors such as AltaVista and, later, Google–and then it had its lunch eaten by Google. After a period of trying to build its own world-class search engine, it’s now decided to outsource the whole shebang to Microsoft for the next decade. Yahoo’s future, clearly, is not about search–and I guess it’s convenient to maintain that its past wasn’t, either.

But I can’t believe I’m the only person who became entranced by the early Web in part because early Yahoo was so amazing who’s saddened to see the company keep its own roots at arm’s length, as it were. Here’s the Yahoo I remember–except this version is from 1996, so the one I visited in 1994 would have been even cruder.

Old Yahoo

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Revealed: The Costs of Microsoft’s Yahoo Deal

Posted by David Worthington on July 31, 2009 at 5:43 pm

BinghooRumor has it that Microsoft CEO Steve Ballmer, flummoxed over press leaks, decreed that password protection be added to Office 2003. Ironically, Ballmer inadvertently detailed the transition costs of the company’s ten year search deal with Yahoo during his presentation at the Microsoft’s Financial Analyst Meeting (FAM) yesterday.

A slide marked “not for disclosure” found its way into the CEO’s PowerPoint deck. The slide itemized $675 million in transition costs, and revealed that Microsoft expects to absorb a $300 million loss during the first two years of the deal. Over time, the company expects to begin earning a “decent return” of “$400 million steady-state.”

The cost breakdown is: $90 million in retention costs, $170 million in R&D costs for paid search, $145 million for Cost of Goods Sold (hosting costs), $150 million in sign-on costs, $70 million for search algorithm R&D, and $50 million for advertiser migration.

The costs could conceivably have been disclosed in annual reports as a footnote or rolled up into other costs, but under SEC rules, Microsoft is allowed to be vague in its forecasts. I also don’t see why revenue would have to be reported separately for the partnership. Ballmer might be big on passwords, but there is no accounting for human error.

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Two Very Brief Things About the Microsoft/Yahoo Deal

Posted by Harry McCracken on July 29, 2009 at 10:09 am

BinghooIt won’t be a truly done deal until it gets regulatory approval, but Microsoft and Yahoo have finally agreed to a partnership which, among other things, will make Bing the search engine on Yahoo and have Yahoo selling ads on Bing. The two companies’ explanation of why this is a good idea is summed up in the name of the microsite about the deal which they’ve launched: ChoiceValueInnovation.com.

Thing 1:

In Microsoft’s press release, CEO Steve Ballmer explains why this is a good idea for everyone concerned:

Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company.

Setting aside the question of whether this’ll turn out to be good for consumers–it might–isn’t it bizarre to see the CEO of Microsoft arguing that a market being dominated by one company is bad for consumers?

Thing 2:

Back in 2004, Yahoo dumped Google as its search engine in favor of its own homegrown engine–the one it now plans to ditch for Bing. Back then, its press release explained the benefits thusly:

The combination of a world-class engineering team and proprietary search technologies, together with Yahoo!’s global reach, breadth and depth of content and leading network assets, uniquely positions Yahoo! to change the game in search.

That was Yahoo Senior VP Jeff Weiner. Here’s current Yahoo CEO Carol Bartz on the Microsoft deal:

This agreement comes with boatloads of value for Yahoo!, our users, and the industry. And I believe it establishes the foundation for a new era of Internet innovation and development. Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides.

In 2004, being proprietary was supposed to provide the scale and resources that would change search for the better; now it’s outsourcing search to Microsoft that’s supposed to accomplish the same results. Oddly enough, nobody ever issues a press release about a deal quoting an executive explaining why it’s a bad idea…even though many deals turn out to be disappointing. (McCracken’s third law of tech-company press releases: Any news described in any press release will always lead to increased innovation…)

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Yahoo-Microsoft Deal: It’s Nearly Official. Thank Heavens.

Posted by Harry McCracken on July 28, 2009 at 5:07 pm

BinghooMultiple reliable sources are reporting that Microsoft and Yahoo have finalized a deal to work together on search and advertising, and it’ll be announced tomorrow. It’s not the merger that Microsoft wasted an immense amount of time on last year, and it’s apparently not as sweeping an arrangement as some folks thought the company would strike. But it’s still a big deal.

For consumers, the major net effect will apparently be that Bing (or some variant thereof) will power Yahoo’s search. Unless you love Yahoo’s current engine or hate Bing, that’s nothing to fear, and it won’t have a major impact on your life. (Or any impact at all if, like the majority of folks, you do your searching at Google.)

For Yahoo, it’s yet another new search strategy. (Once upon a time, the company outsourced search to Google, then decided it was a core part of its business and built its own search engine; now it’s once again something it’s decided it can outsource.) For Microsoft, it helps scratch the must-take-on-Google itch that the company’s had trouble taking care of.

I still think that when the history of Microsoft is written ten or twenty years from now, it’ll be obvious that  search engines and Web advertising  were distractions that kept the company from focusing on its real businesses–operating systems, programming tools, productivity software, and a few other related related areas. For now, though, both Microsoft and Yahoo can end their odd tango and move ahead with a partnership. And we tech journalists who have spent a year and a half writing about all this get more time to devote to other, more concrete matters. Like, for instance, the existence or nonexistence of an Apple tablet that’ll be released either in September or sometime next year…

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Yahoo’s New Look: Quite Nice

Posted by Harry McCracken on July 21, 2009 at 6:23 pm

Yahoo LogoYahoo is rolling out a revised version of its home page today. It represents no radical change, but it’s nice–and almost every change feels like it was made in the interest of Yahoo users.

At first glance, the old home page (which you can choose to retain) and the new one don’t look much different, except for the fact that the site has finally switched to a purple logo. (The Yahoo folks think that purple’s emblematic of the Yahoo brand, although I don’t know many consumers who make that connection.)

Continue Reading →

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Report: Microsoft Days Away from Yahoo Search Deal

Posted by David Worthington on July 17, 2009 at 7:07 pm

A cadre of Microsoft executives is in Silicon Valley to iron a search and online advertising deal with Yahoo, All Things Digital’s Kara Swisher is reporting.

The executives include senior vice president of the company’s Online Audience Business Group Yusuf Mehdi, Online Services Group president Qi Lu, and Online Services senior vice president Satya Nadella, according the report. The terms of the deal allegedly involve Microsoft paying Yahoo billions of dollars upfront to run its search advertising business; Yahoo will receive certain guaranteed payments.

Some sticking points have involved who will have control over data, and traffic acquisition cost rates, the report says. However, I thinkthat Yahoo will take the deal: Despite its new technology initiatives, its market share is slowly decaying.

Meanwhile, Microsoft’s Bing search engine has been received favorably, and it has managed to steal some market share away from Google and Yahoo. It is still too soon to tell whether a trend if developing (it launched last month), but Microsoft’s $90 million advertising campaign won’t hurt its chances at popularity.

Microsoft CEO Steve Ballmer is like a pit bull–he never lets go after he sets his jaws around something. There has been a persistent campaign to strike a deal with Yahoo. All Things Digital says that it could happen as soon as next week. Now we wait.

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