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Look at What Yahoo Could Have Won



Growing up in England, I always enjoyed watching the darts game show Bullseye. Host Jim Bowen took great delight in showing losing contestants the prize they just missed out on. "Look at what you could have won" was just one of his many catchphrases.

Why am I telling you this? It was the first thing that came to mind after reading Microsoft’s Kevin Johnson’s email to employees highlighting the much better offer Yahoo turned down, in favor of Google.

Here’s what Microsoft offered

  1. Microsoft would have invested $8 billion in Yahoo! at $35/share;
  2. Microsoft would have purchased Yahoo!’s search assets for $1 billion, and assumed the operations and R&D expense while returning data back to Yahoo! for use in their advertising business; and
  3. Microsoft and Yahoo! would have entered into a long-term search partnership, where Microsoft would have provided favorable economics to Yahoo! search, including a three-year guarantee of higher monetization than Yahoo!’s Panama paid search system currently provides.

Johnson argues the following benefits Yahoo would have realized…

—New Transfer of Cash to Yahoo! Shareholders. This proposal would have transferred $9 billion from Microsoft to Yahoo!, which could have been used by Yahoo! to reward their shareholders.

—A More Profitable Ongoing Business. This proposal would have resulted in higher operating income on an annual basis for Yahoo!, with our projections more than doubling Yahoo!’s operating income in the first year of operation, and increasing it by more than $1 billion above its current operating income level.

—A More Compelling Search Offering. The combination of the search platforms would have unlocked new R&D innovation, eliminated redundant engineering efforts and allowed for greater scale in serving our customers.

Even with the obvious Microsoft spin, it seems Yahoo took an "anyone but Microsoft" path.

  • http://www.greatpriceshere.com Nicole Price

    Great move to create this mail, leak it so that outsiders and particularly yahoo employees get to see this and wait. With yahoo not getting a quick response from google, and Cahn stepping up the pressure, a lot of interesting developments are likely to happen in the next few weeks.

    Nicole Price’s last blog post..Lighting Up The House

  • MikeM

    Andy, this was a monumentally poor move by Yahoo!.

    Smacks entirely of job security for Decker, Yang and the Board.

    This truely was the last chance anyone had to make a run at Google, at least on the online ad business.
    If cultural differences between the Valley and Redmond contributed to this decision we’re dealing with some very naive people at Yahoo!.

    From one who likes to see a good fight to protect balance I am highly disappointed.

  • http://www.tellinya.com/ 5ubliminal

    Radicalism and stupidity. It’s like idiots out there blaming Microsoft for all the evil in the world but using MS Windows as an OS. Switch the Operating System or stfu!

    Yahoo! was stupid and I hope they change their mind. If they make deals with Google, they will lose all they have had and more. Not to mention that Google will rule the world and I, for one, like balance. A bipolar world.

    PS: Not to forget that Yahoo! fired a lot of people in the past months.
    PPS: I’d send The Onion Movie’s ‘Cockpuncher’ over to the Chairman Board.

  • http://endlessplain.com Simon Heseltine

    Well, we’ll see how it goes now that these two are in bed together, but maybe they’ll “get nothing for two in a bed… not in this game” ;)

    Simon Heseltine’s last blog post..Blog Potomac Speaker Kami Huyse

  • http://www.terryhoward.net/ Terry Howard

    Has anyone stopped to consider that maybe Yahoo cares about the brand and product they’ve worked for so many years to build? Selling to Microsoft means muddying that. I know there are plenty of sheep out there too blind to see it, but the truth of the matter is Microsoft produces poor quality at a slow pace. Excel is the only product they have ever produced or acquired that is well thought out and has a usability level that does not cause you to tear your hair out in frustration. Windows (any version)=garbage, Zune=garbage, hotmail=spammy garbage, AdCenter=garbage, ASP=garbage, IIS=garbage, .NET=unholy festering garbage. Try using other products, check out the alternatives to MS and you will find that they make garbage, consistently. I don’t blame Yahoo one bit for deciding that money is not worth whoring the product they have worked so hard on. Microsoft would turn Yahoo into a garbage heap in no time flat.

    I applaud them for putting integrity over fast cash.

    Terry Howard’s last blog post..Great PPC Job at Full Sail

  • Asanya

    I randomely found out on google about this nice software you can use to get people find you and be attracted to your headlines in search engines. I think it was called glyphius…
    You pretty much type a headline and it gives you a score. You keep editing it and changing few words until the score gets higher and higher and i guess next thing you know, you have a catchy headline ;) I think I’ll try it to advertise my coming up business.

  • http://www.direito2.com.br Ruben Zevallos Jr.

    I don’t know what will be the deal with Google, but one think I know… Yahoo’ll lost a very good oportunity to give a good profits to it’s sharolders… Google want to dominate… and no one want to see… Microsoft by other hand, always said what they want… to make that every computer in the world use and pay for it’s OSes…

  • http://www.poems.md Ashley

    SO it finally happened. Microsoft and Yahoo are now together. WE’ll see the results of their partnership soon!

  • http://www.gadgets4nowt.co.uk PS3

    I may have missed it Andy but hadn’t realised you had spent some time over here. Which part of the UK?

    Bullseye was a classic. If the contestants ever managed to win, the best they could hope for was a caravan. Lose, and when the stage turned it was always the car that went begging!

  • http://www.marketingpilgrim.com Andy Beal

    @PS3 – you did miss it! I was born in England, and lived in Brighton for 25 years. ;-)

  • http://www.evawhite.com Eva White

    Tell me whom do you think a person would rather work for? Google, Yahoo or Microsoft?

    Eva White’s last blog post..Horse Riding

  • http://foolishmumbles.com Top Rated

    “Anyone but Microsoft” may sound nice to the anti-MS crowd out there, but who else has the deep pockets and technical expertise to take an a tech stock with such unrealized potential as Yahoo.

    Top Rated’s last blog post..The Very Best Digital SLR Cameras

  • http://ww.seoresults.co.za Web Marketing Man

    And right now Yahoo! seems to be losing ground hand over fist…steadily slipping into the abyss…

  • http://www.terryhoward.net/ Terry Howard

    Well maybe that’s where our understanding is falling down. Most people who don’t get the decision see Yahoo as merely an abbreviation on the NASDAQ ticker. The people who have poured their blood sweat and tears into building that brand do not. It’s all fine and good to say they are being irresponsible to their stock holders but there is an inherent danger in a market that comes to treat businesses on exactly the same level of mutual funds. You can’t steer a company with 100% of your intention being fast cash now or you will eventually crash into the rocks.

    Terry Howard’s last blog post..Blaming Yourself is Healthy

  • http://www.marketingpilgrim.com Andy Beal

    @Terry – very true, but at the end of the day, when you become a public company, you effectively sell your company spirit for the American dollar. While the ideal is to hold on to the same dreams you had, in reality you no longer own those dreams, your shareholders do.

  • http://www.terryhoward.net/ Terry Howard

    @Andy – That is certainly one way to look at the shareholder relationship, and admittedly currently the most prevalent. But the purpose of buying stock is meant to be an investment into a company whom you see promise, at least that’s how the system began. Today’s investors seem to treat stocks like a lottery ticket or some other get rich quick scheme. They aren’t fans of the product or supportive of the business as is, they want to drop a quarter in the slot machine, pull the lever and then fill their cup with the winnings and move to the next machine. Today’s investors are nothing more than the blue hairs you see circling the slots like vultures at an old worn carpet casino. They aren’t investing to strengthen our economy and help build strong businesses that provide wealth and jobs to real people. So when we look around at our economic downturns, the subprime mortgage collapse and whine out one side of our mouth and then wonder why Yahoo would dare not sell their sweat equity for a Microsoft Instant Millions scratch off… Well, I just gotta shake my head because that line of thinking IS the problem.

    Terry Howard’s last blog post..Blaming Yourself is Healthy

  • http://www.cobtul.org/handbags/chloe-paddington-handbag-a-true-fashion-statement-28/ Cobut

    Big loss for Yahoo

  • http://www.howto-teethwhitening.com/dental-teeth-whitening-rockville-teeth-whitening-services.html Te

    What a wasted chance….Yahoo could have use the money from MS to turn the whole business around.

  • http://www.medi-fi.org/breastfeeding-weaning-toddlers-and-breastfeeding-video-clips.html Sop

    I thought the MS-Yahoo alliance is a good thing for the market. Yahoo could have use the MS strength to further enhance its Search marketshare. But That Jerry is probably alittle too proud to take up the $b offer. How much does the ‘piss’ worth anyway?

  • http://widestep.com Keylogger Guy

    I think partnership with Google would be better for Yahoo anyway.

  • http://www.gadgets4nowt.co.uk PS3

    @Andy, not sure what it was like 25 years ago but Brighton is now a very, hip and trendy place for the up and coming!

  • http://mp3leben.com Tiffany

    Yes, I am starting to believe that Yahoo took an “anyone but Microsoft” path. But the usual love story end up with the girl marrying the man she hate most.

  • http://www.deemx.com DeeMX

    I think too: Google as partner is more perspective for Yahoo, than Microsoft.

  • http://ciarannorris.co.uk Ciaran

    Fantastic post, especially for the use of Jim Bowen’s picture.

    To be fair, I doubt that Jerry Yang really needs a speed boat…

    (sorry, very parochial joke)

    Ciaran’s last blog post..SnapNow: The Real Future Of Mobile Search?

  • http://www.propdata.co.za/ Robert

    Boy have Yahoo! missed out on this one! They really should have simply taken the money and gone.

    @Terry: You wouldn’t mind putting $1m into a company watch it whittle away and then that company refuse to make a profit on that? Because you saw some promise in the company?

    I would advise they take the money. That’s business – nothing personal.

  • http://www.mbwebdesign.co.uk MB Web Design

    Anything that references Jim Bowen and Bulseye gets my thumbs up.

    Back on topic: If I were a Yahoo investor I’d have big problems with the board rejecting an offer that would quite clearly benefit the company as a whole (but maybe not Yang et al.) and it’s shareholders. I think it’s a selfish and personally-motivated decision by the board.