EightBlack.

Well, there goes that opportunity. I don’t know who I am going to bag now.

You see, all those over priced digital agencies who were primarily responsible for those completely irrelevant SWF (Flash Files) are now no longer an easy target. No more lack of total respect by the SEO fraternity.

Those files are now able to be seen by Google (and Yahoo!).

Most SEO practitioners treated flash files with the contempt it deserved. But no more.

Being seen is one thing. Being ranked is entirely another. But at least its a start.

Techcrunch has more here and Adobe’s official line is here.

Bravo.

If you are a parent with young children, you will understand where I’m coming from with this.

Sometimes I walk around the house in my underwear, yelling loudly “It’s good to be the King, It’s good to be the King”.

I want my kids to know who’s in charge.

However, not long after this act of bravery started on my count, my 5-year old daughter came up to me and said in a stern voice, “Daddy, you may be the King, but you’re not the boss”. I looked at her in disdain and gruffly demanded just who is then, if it’s not me.

She says matter of factly,  “Mummy is”.

Sort of a bit like Jerry Yang. He used to be the King at Yahoo!. But he’s no longer the boss.

I wrote a while ago that I honestly thought “the deal” would get done (between Microsoft and Yahoo!). I’d seen Steve Ballmer talk at last years Web 2.0 Expo and as soon as Battelle mentioned the word Google and Search in the one sentence, he started jumping up and down like a 9 year old boy who swallowed 4 and half litres of Ritalin.

Or something like that.

Microsoft desparately wants to win at the search game and thought Yahoo! would have at last, let them get closer to their arch rival, Google.

Anyway, I’ve never been a huge fan of Yahoo! so I sort of really didn’t care either way. I’ve never had a Yahoo email address, rarely use Flickr,  wouldn’t know what Yahoo Groups is/does, and never use Yahoo as my search engine.

And I think Yahoo! are so far behind in the whole area of search marketing, it’s not funny. The only people who have less market share than Yahoo in this space in Australia at least, is Sensis. And they would have better luck selling an STD to someone before they sold a search marketing solution.

But I digress.

I think Jerry Yang’s days are numbered. Carl Icahn is not the sort of person you need circling above and as the Yahoo! stock price heads south, the Board and their major shareholders just might ask Jerry to step aside. He may be the founder, but he may not have a choice.

One thing is clear. Yang hates Microsoft. I don’t reckon he wanted a deal done with the devil at any price.

And Ballmer for once played a game of patience, made his offer, didn’t budge and waited Yahoo! out.

The biggest sign of trouble though has nothing to do with the share price. Nothing to do with Google and Yahoo! getting into bed. And nothing to do with Microsoft.

It’s got to do with the mass exodus of talent leaving Yahoo’s gates. Look, the really smart bastards had already left, and the next calibre of people probably had already been trawling through the Google jobs board.

But when these guys leave, the crack becomes a gaping hole and pretty soon the proverbial damn will burst and there will be no stopping the thing. According to one source, over 50 top executives have left since January 2008, 9 of them since the Microsoft bid collapsed just over a month ago.

You can’t innovate without talent, doesn’t matter how much money the company has. Yang is in it deep now and if there is any hope for Yahoo!, he needs to step aside and take drastic measures to stop the brain drain. Before its too late. And it might already be…

However, if he wants to be like me, and continue to walk around in his underwear in a state of delusion, yelling out “It’s good to be the King” he can go right ahead. It’s just that pretty soon, there’ll be no one left in his Kingdom to preach to.

Which reminds me, I need to ask my wife if I can stay out late tomorrow night…

I honestly didn’t think this would happen. Maybe Ballmer is getting far less impatient in his old age. This from the Microsoft website. I still don’t think this is over by a long shot. Because one thing all the pundits have forgotten in the coverage of this news story, is there’s still the issue of a little search company in Mountain View to deal with.

How Yahoo! and Microsoft intend to deal with “search” in the bigger context is still a massive undertaking.

Be interesting to see what happens when the market opens on Monday in the US and what value it places on Yahoo! then. My guess is that after a week of “blood on their hands”, the Yahoo! directors will want to do a deal with just about anyone.

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:
After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

•	First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.
•	Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.
•	In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.
•	This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.
•	It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,
Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

This is clearly one of the best observations on the potential Microsoft/Yahoo! tie-up. And much, much clearer now. For me at least.

If I was Yahoo!, I’d engage Marc Andreessen pronto.

Although, the feeling on the West Coast is that the deal will get done regardless.

Nope. Nope. And Nope.

I’m no expert but I do think good leadership is knowing when to hold and when to fold. Jerry Yang won’t win this battle. He doesn’t strike me as the type of guy who could pick up a chair and throw it half way across the room like Steve Ballmer could (and does).

I’d even bet that Steve B threw something when Yahoo! rejected their first bid. But probably not very hard.

The whole “hostile” offer isn’t really hostile at all. It was deemed a friendly bid by Microsoft sources. But that’s sort of like asking Osama Bin Whats-his-face to join the UN and take care of the peace process in the Middle East. You just know shit is going to get broken in the process.

Whatever happens during the tit-for-tat, one thing is for sure. Microsoft want this deal. And they’ll stop at nothing to get it done. They have very strong stomachs for this sort of thing - so whether it turns out to be a semi-polite negotiating process between the lawyers, or a full on street brawl, Microsoft will have a well thought out plan for any option presented to them.

I think maybe Steve and Bill got sick of this sticker and decided to do something about it. They may very well just Change The World (at least the online one).

The thought of “going home” doesn’t have a place in their vocabulary.

One thing is for sure. Expect much furniture throwing. I’m off to buy shares in Aeron.

More later. If I can bothered. The whole thing is a little boring if you ask me.

The games are about to begin. David Drummond, Google’s most respected legal eagle, fired the first shot across the bow regarding the hostile takeover offer for Yahoo! by the software giant, Microsoft.

Microsoft are well versed in anti-trust laws. They’ve been battling it out in Europe and the US for years now. And they are hardly to be intimidated by momentum in the blogosphere or mainstream press. Nor will they care what Drummond has to say.

The lawyers and Public Relations folks must be salivating like Pavlovs dog right about now. They will be the clear winners. The consumer - well, I’m not too sure.

I still think the deal will get done, if and its a big if, the regulators allow it.

About 5 years ago, we discovered Google AdWords. More importantly, we met Perry Marshall, a guy who I still regard as the world’s leading authority in the pay per click space. He’s got an interesting take on the Yahoo! and Microsoft gig. There’s a link at the very bottom of this post to a 60 minute interview with another highly respected web authority - Ken McCarthy. And I’ve copied an extract of an email Perry sent to his list over the weekend. The email is worth a read. And the audio is true content. Have a listen. All the details are right below.

Unless you’ve been hiding in a cave, you know that Microsoft now intends to acquire Yahoo so together they can make up the ground they’ve lost against Google.

Let me be very clear that even though my books, coaching programs, etc. are about Google AdWords, nobody would be happier than me for the world to have a really good alternative to Google AdWords for buying clicks. I’m ALL for competition. I would LOVE for Yahoo Search Marketing to be a formidable opponent to Google. (It’s useful, but I sure wouldn’t pretend it’s formidable at this point.)

I would LOVE for MSN AdCenter to be super-cool and powerful, but… alas, it’s not. It’s anemic. And I’m being kind.

Yes, I would love for Microsoft and Yahoo together to be able to kick Google’s butt. Nothing is better for you and me than serious competition for our ad dollars.

Unfortunately…. In My Humble Opinion, expecting Microsoft and Yahoo to be better than Google by getting together is like pairing up two people each with an IQ of 75 and putting them in a spelling bee and hoping that together they’re a 150 genius.

NOT. They’ll just argue with each other about how to mis-spell everything.

For the record, I do hope I’m wrong.

So anyway… how did Google beat Yahoo at its own game? After all, Overture (the former company that was acquired by Yahoo) had a 3-4 year start on Google. At one time they were king. Now they’re scrambling to hang onto a distant 2nd place.

Ken McCarthy and I talk about that very question on this MP3. I describe what it was that pulled Google into the lead, and more importantly, how YOU use exactly the same principles to dominate in YOUR market:

Perry Marshall Interview

The notion that Microsoft and Yahoo! should combine to tackle Google is nothing new. Industry pundits have been speculating around this very subject for the last 2 years.

Except for one thing.

Now the deal is in play. For real.

Redmond have really pulled out all the stops now and offered $31 bucks a share - thats $41 billion. Quite a sum even for Bill and Steve to swallow. Easily their biggest deal yet.
I actually hope the regulators let the deal through. You can bet your sweet Aunt Fannie that Dr. Schmidt et al will be protesting like a Greenpeace activist or Lindsay Lohan at an AA meeting.

Jerry Yang will have a fight on his hands. Yahoo! face some serious soul searching. The market isn’t happy with their performance (despite a revenue lift this last quarter), Panama hasn’t done what it was supposed to (and that was stem the AdWords tide), morale is low, the company faces a round of layoffs and wherever they look, another search company called Google beats them to punch. Deals have been scarce. And Yang hasn’t revitalised the once dominant web goliath since he took over from Terry Semel just over 6 months ago.

More importantly, Yang will have a hard time convincing long suffering Yahoo! shareholders to hold onto his stock, given that Microsoft is offering a 60% plus premium to the closing price of Yahoo! (currently trading at just over $19). Don’t expect Steve to play nice with the offer either - this is a hostile takeover bid. Nothing less.

But put Yahoo!’s assets together with Microsoft and now you’re talking. Combine this with the intellectual horsepower from FAST, the search company recently acquired by Microsoft, and Google suddenly has something to be concerned about.

Good. Innovation is likely to prevail. And Google needs to be put under the pump.

Just let us pray for commonsense on behalf of the ant-trust folks…

This piece courtesy AdNews. It just shows how big the gap is for Yahoo! and Microsoft Live to close if they want to compete with Google at “vanilla” search. In some respects, it’s the very reason Mahalo, MyLiveSearch, ASK and others are pursuing completely different models.

Jerry Yang at Yahoo! has got to be doing some soul searching and you can bet Ballmer at Microsoft threw another chair at the wall when this latest Comscore report came out. I’m looking forward to seeing Steve next week speak live on Day 2 of Web 2.0 in the US. I personally think John Battelle is going to go easy on him for fear of him blowing a valve in public. Or something like that.

Anyway, back to search. Here’s some data that puts Googles’ massive share into perspective.

(Data courtesy Comscore)

My ignorance in looking at this chart is that I wasn’t even aware that Korea had its own search portal. Nor did I realise that the Chinese search platform, Baidu, had so much critical mass - given the censored content it provides.

Of the 61 billion searches conducted in August this year, Google had 37 billion of them (60%), 4 times that of Yahoo! and over 18 times more than Microsoft. Sixty per cent share of any market is massive, some would say too dominant. My take is that Google is just getting started.

When Battelle wrote “The Search” I remember a quote by the 2 founders of Google stating that they thought that the whole “area” of search was only 10% solved. Now, 2-3 years on, they might say that they are closer to 20%. But there’s still a long way to go.

There’s a lot of money being spent on local search - for good reason. It’s essentially the domain of the printed directories, like Yellow. And Google knows this, knows what money is at stake, and wants a piece of the action.

I don’t think the average person switches search engines easily. The advantage Google has is that its now a part of our DNA, our dictionary and vocabulary.

My question to you is this. What would make YOU switch?

It’s official. And certainly no surprise.

The Yahoo! spin machine hasn’t got a lot to work with. My take is that investors wanted someone to take accountability for the lack of progress, the languid share price and the inability to keep pace with Google. Semel stepped up to the plate so to speak.

It will be interesting to see the direction and strategy of the number 2 search player now that co-founder Jerry Yang is the head honcho.

All is not well at Yahoo! They cant keep pushing the “oh its ok now, Panama is launched and the numbers are due to climb back quickly”. The gap between Google and Yahoo! continues to widen, across a wide range of areas.

Do you think Yahoo! has still got what it takes to beat Google at its own game?

The industry titans have had a crack at this before.

But because the Google juggernaut over the past 12 months has shown no sign of slowing down, what choice did Ballmer and Semel have but to go back to the table with a different perspective.

Story broke via the New York Post and now this snapshot courtesy the Wall Street Journal.

The renewed talks are a sign of the continued growth in Google’s power and problems over the past year with in-house efforts at Yahoo and Microsoft to ride a boom in Internet advertising. Meanwhile, management changes at both companies could help pave the way for a pairing that a year ago couldn’t happen. The talks were first reported in the New York Post.

Microsoft and Yahoo couldn’t be reached for comment.

I love this saying from one of Tom Peter’s slide decks…

“When asked to name just one big merger that had lived up to expectations, Leon Cooperman, former co-chairman of Goldman Sachs’ Investment Policy Committee, answered: I’m sure there are success stories out there, but at this moment I draw a blank.”

I agree. You dont get economies of scale by being bigger. This deal, to be successful, will require abundant thinking by both sides and I’m just not convinced they’ll be able to get it over the line.

Microsoft traditionally dont like big acquisitions and this one will require them to trump up with a boat load of cash - enough to even give them indigestion and its public knowledge that one of Yahoos founders, Jerry Yang, thinks Microsoft is about as appealing as a prostrate exam. Or something like that. Apparently, he doesn’t even use any of their applications.

If a deal just so happens to eventually get over the line, then good. It will make the space a lot more interesting. And it will push Google harder.

If it doesn’t, then Yahoo! should concentrate on doing what it does best. And that’s serving its communities.