Damn. I want to cry right now. Mr. Softy offered $44 billion to pick up the battered remains of Yahoo, stepping up to the plate with the chutzpah to execute a turnaround that seemed unlikely to happen from within.
But what do they get for it? And more importantly, is it worth it? Last week Yahoo stock was trading around $18. Microsoft’s offer of $31 a share is roughly a 60% premium over that. Sure they are both getting their asses handed to them in the search arena, but does a Microsoft with less than 25% combined market share pose a threat to Google anyway? I highly doubt it. Remember, the key to search dominance is results. Give the people what they want, and they’ll come back for more. But someone will eventually build a better algorithm, and users will migrate to that. How many people now find what the info they are looking for on Wikipedia anyway? If I’m not shopping, or looking for specific product info, thats where I head. But those types of searches don’t generate revenue anyway.
So its not for search. Must be for display, targeting and ad serving, right? Makes sense, but isn’t there already a huge overlap in users and services? Yahoo’s ad network has roughly 150 million unique users per month, 85% reach. Yahoo proper has about 135 million with 75% reach. MSN has about 100 million and about 60% reach. Blue Lithium, which Yahoo bought for $300 million also has 135 million uniques per month. Combined and de-duped, however, how much of an audience is really gained? If they are going to continue to frequency cap advertising per ad (ie – user wont see the same ad more than twice in any 24 hour period) across their properties, how much is that going to cut into their revenue? How many advertisers are out there willing to step up and pay the premium price tag for advertising on Yahoo or MSN if and when all that inventory becomes available?
So what else would they get? Right Media, the online ad exchange, should help the optimization of all that inventory, so there’s value there. And Yahoo just offered $150 million for Maven Networks, who powers video for Fox News, CBS Sports, CNet, and Scripps Networks. So there’s even more high value video inventory.
But overall, does it make sense? And is the price right given the economic downturn? If my previous post holds any water, then its a good move for Microsoft. But if its a pure ad revenue play, and ad revenue takes a big hit over the next year, the premium Uncle Bill is paying for Yahoo may look pretty ridiculous. $31 for an $18 share? Well, I’m just pissed I dumped my Yahoo in December to take the loss…..and my lumps.